Title: Nowcasting firm's financial standing using global inter-firm relationships
Authors: Takayuki Mizuno - National Institute of Informatics (Japan) [presenting]
Kenta Yamada - National Institute of Informatics (Japan)
Abstract: The main factor in a companys fundamentals is financial variables. However, it is not always easy to obtain information about them. The financial variables are discretely published quarterly as settled-account reports, whereas stock prices change at speeds of one hundredth of a second in the stock market. To measure the gap between asset price and fundamentals, we must always nowcast company performance in the time between one settlement report and the next. We establish an estimation method of financial variables with high estimation accuracy by using global interfirm relationships. There are many companies with similar businesses, sales areas and sizes. Such companies have business connections. Because the settlement dates are different for many companies, we can estimate unreported financial variables of a particular company from ones already reported by similar companies. We investigate whether this can be achieved using a unique dataset that covers a list of business connections and a highly structured companys revenues by geographic and business segments. Through the analysis of random forests, we found that common shocks affecting one company can be measured from revenues of companies that operate in the same area.