ARMA: Forecasting FBNH's Year-End Share Price

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Friday, October 01, 2021 04:30 AM / by Proshare Research/ Header Image Credit: EcoGraphics


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The R-software employed for this report provides several powerful dynamic forecasting tools: the ARMA model. The ARMA model itself selects the ideal AR and MA orders required to forecast stock prices. The auto-regressive component addresses the changes in current stock prices arising from their correlation with their lags.

 

In contrast, the moving average component determines the ideal number of lags needed to smoothen the distribution and isolate unexpected extraneous factors' impact. As a result, a dynamic model was built using the recommended lags and residuals to predict the future price.

 

Using weekly data from February 2018 to August 13, a total of 183 data points are employed to forecast the end of the quarter and end of the year stock prices of the Tier banks.

 

With the aid of an ARMA (2,1) model, FBNH's share price was forecast to settle at N7.30 at the end of Q3 2021 and slip slightly to N7.29 at the end of the year. This implies that the stock is expected to record an annual return of +0.85% by the end of the year.

 

This ties in with the visualization of the 50 and 200-day moving average, which suggests that the bank's share price is not expected to substantially trend upward or downward in the near term (see table 5).  

 

Table 5: Forecasts; the Analysts Tea Leaves

 

FBNH

UBA

GTB

ACCESS

ZENITH

Q2 '21 Share Price

7.44

7.50

28

9.10

24.40

Q3 '21 Forecast

7.30

7.49

27.98

9.10

24.40

Q4 '21 Forecast

7.29

7.47

27.97

9.11

24.41

ARMA (p, q)

(2,1)

(0,0)

(2,2)

(2,4)

(0,1)

Source: Proshare Research

 



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Downloadable Versions of 100 Days After CBN's Board Removal: First Bank's Shaky House of Cards Report (PDF)

1.      Executive Summary: 100 Days After CBN's Board Removal: First Bank's Shaky House of Cards -  September 19, 2021

2.     Full Report: 100 Days After CBN's Board Removal: First Bank's Shaky House of Cards  -  September 19, 2021


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