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1 – 10 of over 7000Marko Kureljusic and Erik Karger
Accounting information systems are mainly rule-based, and data are usually available and well-structured. However, many accounting systems are yet to catch up with current…
Abstract
Purpose
Accounting information systems are mainly rule-based, and data are usually available and well-structured. However, many accounting systems are yet to catch up with current technological developments. Thus, artificial intelligence (AI) in financial accounting is often applied only in pilot projects. Using AI-based forecasts in accounting enables proactive management and detailed analysis. However, thus far, there is little knowledge about which prediction models have already been evaluated for accounting problems. Given this lack of research, our study aims to summarize existing findings on how AI is used for forecasting purposes in financial accounting. Therefore, the authors aim to provide a comprehensive overview and agenda for future researchers to gain more generalizable knowledge.
Design/methodology/approach
The authors identify existing research on AI-based forecasting in financial accounting by conducting a systematic literature review. For this purpose, the authors used Scopus and Web of Science as scientific databases. The data collection resulted in a final sample size of 47 studies. These studies were analyzed regarding their forecasting purpose, sample size, period and applied machine learning algorithms.
Findings
The authors identified three application areas and presented details regarding the accuracy and AI methods used. Our findings show that sociotechnical and generalizable knowledge is still missing. Therefore, the authors also develop an open research agenda that future researchers can address to enable the more frequent and efficient use of AI-based forecasts in financial accounting.
Research limitations/implications
Owing to the rapid development of AI algorithms, our results can only provide an overview of the current state of research. Therefore, it is likely that new AI algorithms will be applied, which have not yet been covered in existing research. However, interested researchers can use our findings and future research agenda to develop this field further.
Practical implications
Given the high relevance of AI in financial accounting, our results have several implications and potential benefits for practitioners. First, the authors provide an overview of AI algorithms used in different accounting use cases. Based on this overview, companies can evaluate the AI algorithms that are most suitable for their practical needs. Second, practitioners can use our results as a benchmark of what prediction accuracy is achievable and should strive for. Finally, our study identified several blind spots in the research, such as ensuring employee acceptance of machine learning algorithms in companies. However, companies should consider this to implement AI in financial accounting successfully.
Originality/value
To the best of our knowledge, no study has yet been conducted that provided a comprehensive overview of AI-based forecasting in financial accounting. Given the high potential of AI in accounting, the authors aimed to bridge this research gap. Moreover, our cross-application view provides general insights into the superiority of specific algorithms.
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Since crude oil is crucial to the nation's economic growth, crude oil futures are closely related to many other markets. Accurate forecasting can offer investors trustworthy…
Abstract
Purpose
Since crude oil is crucial to the nation's economic growth, crude oil futures are closely related to many other markets. Accurate forecasting can offer investors trustworthy guidance. Numerous studies have begun to consider creating new metrics from social networks to improve forecasting models in light of their rapid development. To improve the forecasting of crude oil futures, the authors suggest an integrated model that combines investor sentiment and attention.
Design/methodology/approach
This study first creates investor attention variables using Baidu search indices and investor sentiment variables for medium sulfur crude oil (SC) futures by collecting comments from financial forums. The authors feed the price series into the NeuralProphet model to generate a new feature set using the output subsequences and predicted values. Next, the authors use the CatBoost model to extract additional features from the new feature set and perform multi-step predictions. Finally, the authors explain the model using Shapley additive explanations (SHAP) values and examine the direction and magnitude of each variable's influence.
Findings
The authors conduct forecasting experiments for SC futures one, two and three days in advance to evaluate the effectiveness of the proposed model. The empirical results show that the model is a reliable and effective tool for predicting, and including investor sentiment and attention variables in the model enhances its predictive power.
Research limitations/implications
The data analyzed in this paper span from 2018 through 2022, and the forecast objectives only apply to futures prices for those years. If the authors alter the sample data, the experimental process must be repeated, and the outcomes will differ. Additionally, because crude oil has financial characteristics, its price is influenced by various external circumstances, including global epidemics and adjustments in political and economic policies. Future studies could consider these factors in models to forecast crude oil futures price volatility.
Practical implications
In conclusion, the proposed integrated model provides effective multistep forecasts for SC futures, and the findings will offer crucial practical guidance for policymakers and investors. This study also considers other relevant markets, such as stocks and exchange rates, to increase the forecast precision of the model. Furthermore, the model proposed in this paper, which combines investor factors, confirms the predictive ability of investor sentiment. Regulators can utilize these findings to improve their ability to predict market risks based on changes in investor sentiment. Future research can improve predictive effectiveness by considering the inclusion of macro events and further model optimization. Additionally, this model can be adapted to forecast other financial markets, such as stock markets and other futures products.
Originality/value
The authors propose a novel integrated model that considers investor factors to enhance the accuracy of crude oil futures forecasting. This method can also be applied to other financial markets to improve their forecasting efficiency.
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Taicir Mezghani, Mouna Boujelbène and Souha Boutouria
This paper investigates the predictive impact of Financial Stress on hedging between the oil market and the GCC stock and bond markets from January 1, 2007, to December 31, 2020…
Abstract
Purpose
This paper investigates the predictive impact of Financial Stress on hedging between the oil market and the GCC stock and bond markets from January 1, 2007, to December 31, 2020. The authors also compare the hedging performance of in-sample and out-of-sample analyses.
Design/methodology/approach
For the modeling purpose, the authors combine the GARCH-BEKK model with the machine learning approach to predict the transmission of shocks between the financial markets and the oil market. The authors also examine the hedging performance in order to obtain well-diversified portfolios under both Financial Stress cases, using a One-Dimensional Convolutional Neural Network (1D-CNN) model.
Findings
According to the results, the in-sample analysis shows that investors can use oil to hedge stock markets under positive Financial Stress. In addition, the authors prove that oil hedging is ineffective in reducing market risks for bond markets. The out-of-sample results demonstrate the ability of hedging effectiveness to minimize portfolio risk during the recent pandemic in both Financial Stress cases. Interestingly, hedgers will have a more efficient hedging performance in the stock and oil market in the case of positive (negative) Financial Stress. The findings seem to be confirmed by the Diebold-Mariano test, suggesting that including the negative (positive) Financial Stress in the hedging strategy displays better out-of-sample performance than the in-sample model.
Originality/value
This study improves the understanding of the whole sample and positive (negative) Financial Stress estimates and forecasts of hedge effectiveness for both the out-of-sample and in-sample estimates. A portfolio strategy based on transmission shock prediction provides diversification benefits.
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Ziwen Gao, Steven F. Lehrer, Tian Xie and Xinyu Zhang
Motivated by empirical features that characterize cryptocurrency volatility data, the authors develop a forecasting strategy that can account for both model uncertainty and…
Abstract
Motivated by empirical features that characterize cryptocurrency volatility data, the authors develop a forecasting strategy that can account for both model uncertainty and heteroskedasticity of unknown form. The theoretical investigation establishes the asymptotic optimality of the proposed heteroskedastic model averaging heterogeneous autoregressive (H-MAHAR) estimator under mild conditions. The authors additionally examine the convergence rate of the estimated weights of the proposed H-MAHAR estimator. This analysis sheds new light on the asymptotic properties of the least squares model averaging estimator under alternative complicated data generating processes (DGPs). To examine the performance of the H-MAHAR estimator, the authors conduct an out-of-sample forecasting application involving 22 different cryptocurrency assets. The results emphasize the importance of accounting for both model uncertainty and heteroskedasticity in practice.
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Gary Moore and Marc William Simpson
Using various proxies for the firms' return on equity (ROE) and retention ratios (b) the authors calculate 36 sustainable growth rates, on a rolling basis, for a comprehensive set…
Abstract
Purpose
Using various proxies for the firms' return on equity (ROE) and retention ratios (b) the authors calculate 36 sustainable growth rates, on a rolling basis, for a comprehensive set of firms over a 52-year period. The authors then assess the ability of these different sustainable growth rates to predict the actual, out-of-sample, five-year growth rates of the firms' earnings.
Design/methodology/approach
The authors compare the forecast to determine which method of estimating ROE and b produce the lowest mean-squared-errors and then determine the estimation method that works best for firms with different characteristics and for firms in different industries.
Findings
Overall, using the median ROE of all firms in the market and the 5-year average of the specific firm's retention ratio produces the lowest, statistically significant, forecast errors. Variations are documented based on firm characteristics, including dividend payout, level of ROE and industry.
Practical implications
The findings can guide practitioners in using the best earnings forecasting method.
Originality/value
Financial textbooks seem universally to suggest that one method of estimating the growth rate of a firm's earnings is to calculate the “sustainable growth rate” by multiplying the firm's ROE by the firm's b. At the same time, multiple methods of proxying for both ROE and b have been suggested; therefore, it is an interesting and useful empirical question, which, heretofore, has not been addressed in the literature, as to which estimation of the sustainable growth rate best approximates the actual future growth of the firm's earnings. The findings can guide practitioners in using the best earnings forecasting method.
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The purpose of this study is to analyze the fluctuations in gold prices within the Saudi Arabian market and to develop a reliable forecasting model to aid market participants and…
Abstract
Purpose
The purpose of this study is to analyze the fluctuations in gold prices within the Saudi Arabian market and to develop a reliable forecasting model to aid market participants and policymakers in making informed decisions.
Design/methodology/approach
In this study, we employ a rigorous time series analysis methodology, including the ARIMA (Auto Regressive Integrated Moving Average) model, to analyze historical gold price data in the Saudi Arabian market. The approach involves identifying optimal model parameters and assessing forecast accuracy to provide actionable insights for market participants.
Findings
The study showcases that the autoregressive properties of past gold prices play a pivotal role in capturing the inherent serial correlation within the market, enabling the ARIMA model to effectively forecast future gold price movements with accuracy.
Research limitations/implications
Our study primarily focuses on quantitative analysis, whereas few qualitative parameters are not included. Future studies may benefit from incorporating qualitative factors and expert opinions to enhance the robustness of gold price predictions and capture the full spectrum of market dynamics.
Social implications
Participants and policymakers may find this study helpful in navigating the complicated Saudi Arabian gold market. By understanding financial stability and investment decisions more thoroughly, individuals and institutions may be able to manage their portfolios more effectively.
Originality/value
By combining historical insights with advanced ARIMA modeling techniques, this research provides valuable insight into gold price dynamics in the Saudi Arabian market.
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Hedi Ben Haddad, Sohale Altamimi, Imed Mezghani and Imed Medhioub
This study seeks to build a financial uncertainty index for Saudi Arabia. This index serves as a leading indicator of Saudi economic activity and helps to describe economic…
Abstract
Purpose
This study seeks to build a financial uncertainty index for Saudi Arabia. This index serves as a leading indicator of Saudi economic activity and helps to describe economic fluctuations and forecast economic trends.
Design/methodology/approach
This study adopts an extension of the Jurado et al. (2015) procedure by combining financial uncertainty factors with their net spillover effects on GDP and inflation to construct an aggregate financial uncertainty index. The authors consider 13 monthly financial variables for Saudi Arabia from January 2010 to June 2021.
Findings
The empirical results show that the constructed financial uncertainty estimates are good leading indicators of economic activity. The robustness analysis suggests that the authors’ proposed financial uncertainty estimators outperform the alternative estimates used by other existing approaches to estimate the financial conditions index.
Originality/value
To the best of the authors’ knowledge, this is the first attempt at constructing a financial uncertainty index for Saudi Arabia. This study extends the empirical literature, from which the authors propose a novel conceptual framework for building a financial uncertainty index by combining the approach of Jurado et al. (2015) and the time-varying connectedness network approach proposed by Antonakakis et al. (2020)
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Imen Fredj and Marjene Rabah Gana
This article examines the link between the structure of the board of directors and target price accuracy using a sample of 51 listed firms on the Tunisian Stock Exchange over the…
Abstract
Purpose
This article examines the link between the structure of the board of directors and target price accuracy using a sample of 51 listed firms on the Tunisian Stock Exchange over the period of 2011–2017.
Design/methodology/approach
In this study, the authors used the generalised method of moments (GMM) model to control the endogeneity problem.
Findings
As a result, that model can serve as a signal in the forecasting process. The authors' results suggest that target price accuracy is negatively related to board independence, and dual Chief Executive officer (CEO). In addition, CEO compensation tends to exert a negative impact on target price error.
Practical implications
The authors' findings are valuable for common investors because the findings can be useful in enhancing their capital allocation decisions by assigning higher weights to forecasts issued by firms with strong corporate governance systems. The authors' study also has practical implications for managers and policymakers. Specifically, the evidence provided herein suggests that firms with strong corporate governance mechanisms enhance the accuracy of market expectations, alleviate information asymmetry, and limit market surprises, especially in a context characterised by weak investor protection. The authors' results highlight the advantages of strong corporate governance in improving a firm's information environment and, therefore, are useful for the cost–benefit analysis of improving internal governance mechanisms. Additionally, the authors' results may prove useful to investors who can rely on the information provided by analysts for well-governed companies.
Social implications
The authors' study contributes to the literature in both corporate governance and analysts' forecasts fields. The study provides additional evidence of the benefit of board quality attributes on target price accuracy in an emerging market characterised by high information asymmetry and weak investor protection. The authors' findings exhibit the effectiveness of board attributes in producing better financial information quality in Tunisia. This is useful for investors who may improve their capital allocation decisions by assigning greater weights to target price forecasts of companies with good governance quality, suggesting that good corporate governance is a credible signal of better financial information quality. These results have important implications for capital market regulators and corporate management in encouraging the implementation of good governance practices.
Originality/value
The authors attempted to assess whether corporate governance of listed firms are priced in the Tunisian context characterised by weak governance control and to highlight which mechanism is highly considered by independent financial analysts to build their forecasts.
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Mohammad Reza Fathi, Hamid Rahimi and Mehrzad Minouei
The main purpose of this paper is to predicate financial distress using the worst-practice-frontier data envelopment analysis (WPF-DEA) model and artificial neural network.
Abstract
Purpose
The main purpose of this paper is to predicate financial distress using the worst-practice-frontier data envelopment analysis (WPF-DEA) model and artificial neural network.
Design/methodology/approach
In this study, a neural network technique was used to forecast inputs and outputs in the future time-period. Using a WPF-DEA model, financially distressed companies were identified based on the worst performance, and an improvement solution was provided for those decision-making units.
Findings
This study’s findings show that dynamic WPF-DEA has high predictability in corporate financial distress, and it can be used with high confidence. Based on the future time-period results, JOUSH & OXYGEN was predicted to be a financially distressed company in the two future time-periods.
Originality/value
In recent decades, globalization, technological changes and a competitive space have increased uncertainty in the economic environment. In such circumstances, economic growth certainly depends on correct decision-making and optimal allocation of resources. It can be done by introducing appropriate tools and models for assessing corporate financial conditions, including financial distress and bankruptcy.
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Nitiyatharishini Veerasingam and Ai Ping Teoh
Digital currency investment has emerged as a result of global transformation toward technology-driven human lives. In Asia, Malaysia as an Islamic country is one of the early…
Abstract
Purpose
Digital currency investment has emerged as a result of global transformation toward technology-driven human lives. In Asia, Malaysia as an Islamic country is one of the early adopters with a high level of awareness on cryptocurrency. This paper aims to investigate the factors affecting the investment decision in cryptocurrency among potential investors in Malaysia.
Design/methodology/approach
Data was collected from 200 individuals aged 18 years and over. The hypotheses were tested using the partial least squares – structural equation modeling technique.
Findings
Results showed that attitude toward risk and perceived behavioral control have a significant positive effect on the investor’s investment decision in cryptocurrency. Interestingly, machine learning forecasting enhances the relationship between perceived benefits and the investment decision in cryptocurrency.
Practical implications
Results benefit investors and practitioners on the significant determinants of investment decision in cryptocurrency in emerging market.
Originality/value
Despite having high volatility and complexity in price determination, and being decentralized, cryptocurrency has managed to attract many investors due to reasons less explored. The outcome of this study extends the theory of planned behavior and confirms the role of machine learning forecasting as a moderator in the context of cryptocurrency investment.
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