Introduction to the special issue on analytical and decision-making technique innovation in financial market
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- Open access
- Published: 19 November 2020
- Liang Xu1,
- Liuren Wu2,
- Xiao Li1 &
- …
- Feng Shen1
Financial Innovation volume6, Articlenumber:49 (2020) Cite this article
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The selection of appropriate analytical methods and techniques for decision-making is crucial in the financial markets, to correctly assess investments. Effective managers use a variety of decision-making techniques as they seek to evaluate alternatives and make sound decisions. After the COVID-19 pandemic, the global financial market has experienced sharp fluctuations. Recent technique innovations in the financial markets include both the development of new models as well as the incorporation of big data. In this special issue, we provide an overview of analytical and decision-making technique innovations arising from research and development. We also introduce the papers in this special issue. We show that global adoption of blockchain and big-data technologies would be the most successful technique in finance and other business sectors, and will lead to analytical and decision-making innovations as well as many research opportunities.
This special issue is the 24th issue of Financial Innovation (FIN), Volume 6, No. 6 (2020). It presents six papers contributed by 14 authors and co-authors from Brazil, China, Indonesia, Iran, Taiwan, and Turkey. The six papers explore contemporary theories or state-of-the-art technologies including, but not limited to, the following areas:
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Predictive technique
Nowadays, the predictive technique has been drawing attention in relation to emerging financial products such as bitcoin. The paper titled “Predicting changes in Bitcoin price using grey system theory” adopts the GM(1,1) model with a first-order differential equation to model the trend in time series.
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Risk measure technique
The performance of trading stocks immediately after sharp movements in exchange rates has seldom been explored in existing studies. In the paper titled “Trading stocks following sharp movements in the USDX, GBP/USD, and USD/CNY,” historical data of the constituent stocks of the DJ 30, FTSE 100, and SSE 50 indexes were analyzed, with the results indicating that the share prices were more volatile after sharp movements in the CNY, even though the CNY was less volatile given China’s exchange rate policy.
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Effectiveness analysis technique
Topics related to investment effectiveness, such as hedge effectiveness, have long been of interest in the financial literature. The main objective of the paper “Hedge effectiveness of put replication, gold, and oil in ASEAN-5 equities” is to analyze the effectiveness of put replication strategies, gold, and oil on hedge equities in the ASEAN-5 (Indonesia, Malaysia, Singapore, Thailand, and the Philippines). This study also implies that risk-averse investors should opt for a put-replication strategy or guaranteed financial products, rather than a commodities-hedging strategy. The paper titled “How to compare market efficiency? The Sharpe Ratio based on the ARMA-GARCH forecast” develops a formula of the Sharpe ratio from the ARMA-GARCH model and finds that the Sharpe ratio depends only on the coefficients of the AR and MA terms and is not affected by the GARCH process.
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Pricing technique
See AlsoRole Of Finance In Business Decision Making/8 Top Tips. | Business AdviceStrategies for Effective Decision Making in Finance - Skills for FinanceFinancial Decision-Making Process | Steps, Key Factors & ToolsWith the development of Bitcoin, Bitcoin pricing analysis has drawn increasing attention. The paper titled “Bitcoin pricing: Impact of attractiveness variables” seeks to contribute to Bitcoin pricing analysis based on the dynamics between variables of attractiveness and the value of the digital currency. This study demonstrates that, during a worldwide crisis, Bitcoin becomes an alternative investment, increasing its price. Based on this finding, Bitcoin may be used as a safe haven by the financial market and its intrinsic characteristics might help investors and governments find new mechanisms to deal with monetary transactions.
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Knowledge-based decision-making
Nowadays, an increasing number of knowledge-based decision-making methods are being employed in every aspect of the financial market for different scales such as micro (individual investment), medium (companies), and macro (central bank) decisions. The paper titled “Decision making on financial investment in Turkey using ARDL long-term coefficients and AHP” aims to solve the following decision-making problem: “Which financial investment instrument is most apt in the Turkish financial market?”. By using the coefficients obtained from the ARDL model and the analytic hierarchy process (AHP) model, the EURO was identified as the most appropriate investment instrument for individual investors.
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Authors and Affiliations
Southwestern University of Finance and Economics, Chengdu, China
Liang Xu,Xiao Li&Feng Shen
City University of New York, New York, USA
Liuren Wu
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- Liuren Wu
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- Xiao Li
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- Feng Shen
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All authors wrote, corrected and agreed to the published version of the manuscript. All authors read and approved the final manuscript.
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Correspondence to Liang Xu.
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Cite this article
Xu, L., Wu, L., Li, X. et al. Introduction to the special issue on analytical and decision-making technique innovation in financial market. Financ Innov 6, 49 (2020). https://doi.org/10.1186/s40854-020-00215-z
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DOI: https://doi.org/10.1186/s40854-020-00215-z
I'm an expert in financial markets and decision-making techniques, with a deep understanding of the concepts discussed in the article "Introduction to the special issue on analytical and decision-making technique innovation in financial market" published in Financial Innovation in 2020.
The article highlights the critical importance of selecting appropriate analytical methods and decision-making techniques in the financial markets, especially in assessing investments. In the aftermath of the COVID-19 pandemic, the global financial market has witnessed significant fluctuations, prompting innovative developments in techniques, including the integration of new models and big data.
The special issue presents six papers contributed by authors from Brazil, China, Indonesia, Iran, Taiwan, and Turkey. These papers cover various contemporary theories and technologies, emphasizing predictive techniques, risk measure techniques, effectiveness analysis techniques, pricing techniques, and knowledge-based decision-making.
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Predictive Technique: The paper "Predicting changes in Bitcoin price using grey system theory" employs the GM(1,1) model to analyze the trend in time series, focusing on emerging financial products like Bitcoin.
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Risk Measure Technique: The paper "Trading stocks following sharp movements in the USDX, GBP/USD, and USD/CNY" explores the performance of trading stocks after sharp movements in exchange rates, with a focus on the CNY and China's exchange rate policy.
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Effectiveness Analysis Technique: The paper "Hedge effectiveness of put replication, gold, and oil in ASEAN-5 equities" analyzes the effectiveness of put replication strategies, gold, and oil on hedge equities in the ASEAN-5 countries. Another paper, "How to compare market efficiency? The Sharpe Ratio based on the ARMA-GARCH forecast," develops a formula for the Sharpe ratio from the ARMA-GARCH model.
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Pricing Technique: The paper "Bitcoin pricing: Impact of attractiveness variables" investigates the dynamics between variables of attractiveness and the value of Bitcoin, particularly during worldwide crises.
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Knowledge-Based Decision-Making: The paper "Decision making on financial investment in Turkey using ARDL long-term coefficients and AHP" addresses the decision-making problem of identifying the most appropriate financial investment instrument in the Turkish financial market. It utilizes ARDL long-term coefficients and the analytic hierarchy process (AHP) model, concluding that the EURO is the most suitable investment instrument for individual investors.
These contributions collectively provide insights into the evolving landscape of analytical and decision-making techniques in financial markets, showcasing the interdisciplinary nature of financial innovation. If you have any specific questions or need further elaboration on any of these concepts, feel free to ask.
