Finance prediction of future (m.w.kolisnyk)

FINANCE: PREDICTION OF THE FUTUREContemporary Quantitative and Non-quantitative Trends

2013-03-06

Mykhajlo Kolisnyk,Senior Fellow, Kyiv School of Economics

Partner, Strategy Institute inspira $

Kyiv School of Economicsfounded by EERC and the Victor Pinchuk Foundation

«Contemporary Economics looks like a chess game. You only can win if you are predicting more steps ahead than your competitor»

Unknown

Frontal Lobe – area responsible for long-run

decisions, planning, reasoning and consequences analysis

MRT

Deep Limbic System –area responsible for our

dreams, illusions pleasure and …

operations planning partMRT

Bad News for Long-Run Planners

http://biology.about.com/od/humananatomybiology/a/anatomybrain.htm

Frontal Lobe – area responsible for long-run

decisions, planning, reasoning and consequences analysis

MRT

Deep Limbic System –area responsible for our

dreams, illusions pleasure and …

operations planning partMRT

Bad News for Long-Run Planners

http://biology.about.com/od/humananatomybiology/a/anatomybrain.htm

Frontal Lobe – area responsible for long-run

decisions, planning, reasoning and consequences analysis

MRT

Deep Limbic System –area responsible for our

dreams, illusions pleasure and …

operations planning partMRT

Bad News for Long-Run Planners

In according to MRT investigation our Frontal Lobe take part in planning processes that not exceeds 1 month

Taleb, JacobsDeep Limbic System takes active part in decisions withconsequences more long than 1 month period

Frontal Lobe – area responsible for long-run

decisions, planning, reasoning and consequences analysis

MRT

Deep Limbic System –area responsible for our

dreams, illusions pleasure and …

operations planning partMRT

Bad News for Long-Run Planners

In according to MRT investigation our Frontal Lobe take part in planning processes that not exceeds 1 month

Taleb, JacobsDeep Limbic System takes active part in decisions withconsequences more long than 1 month period

Emotional (Alternative) Approach to Forecasting and Decision-making

Charles S. Jacobs «Management Rewired»

• We have our world in our head only, perceptions of people mostly differ

• Our thinking are subjective• Emotionally based decisions are better than calculated• Feedback kills motivation

http://www.digest.kyivstar.ua/books/736/

Nassim Nicholas Taleb‘Black Swan’

• Past experience always constrained our further development

• We cannot predict ‘black swans’• Do not use maps instead of real landscape

http://www.digest.kyivstar.ua/books/32/review/

It looks that traditional forecasting and analytical methods do not work at all?

No, we still can use simplest forecasting and analytical tools to predict ordinary company activity

We will not predict ‘black swans’, we still need to learn how to live with this fact but we can use a forecasts and badly need to use analytics in our management activity

The researchers will improve a quality of models in order to fit contemporary needs

Quantitative (Traditional) Approach to Forecasting and Decision-making

Sales Forecasting and

Budgeting

Sal

es V

olum

e

Time

Probability

Forecast Fact

Sales Growth

Quantitative (Traditional) Approach to Forecasting and Decision-making

Inventory Planning –

Classical EOQ Approach

Quantitative (Traditional) Approach to Forecasting and Decision-making

Contribution Margin Analysis for Company SCU’s

Product AlfaProduct

Beta

Product Gamma

CMR – delta CMR Matrix

Con

tribu

tion

Mar

gin

Rat

e C

MR

Product Contribution Margin to Total Contribution Margin - delta CMR

Quantitative (Traditional) Approach to Forecasting

and Decision-making

Portfolio Analysis –Markowitz

Model 3D View 3 assets

We need to have a wisdom to accept both

Traditional Approach

vs.Alternative Approach

A fractal is a mathematical set that has a fractal dimension that usually exceeds its topological dimension[1] and may fall between the integers.[2]

Fractals are typically self-similar patterns, where self-similar means they are "the same from near as from far

Wiki

It is expected, thatFractal Mathematics, in the nearest future helps us to join Traditional and Alternative Approaches

Good News for Long-Run Planners

http://biology.about.com/od/humananatomybiology/a/anatomybrain.htm

Right Part of Human Brains –area responsible for our intuition

MRT

Even our intuition in the nearest future become a target of quantitative modeling, probably, on the base of Fractal Math

We are at the edge of these changes !

THANK YOU!(067) 230 01 05kolisnyk@kse.org.uakolisnyk@inspira.in.uainspira.in.ua Copyright © 2013 kolisnyk