Business, Economics, and Finance with Matlab, GIS, and Simulation Models

Business Economics and Finance with MATLAB, GIS, and Simulation Models......Page 1
Dedication......Page 3
Acknowledgements......Page 4
List of Tables......Page 17
List of Figures......Page 18
List of Code Fragments......Page 20
Table of Contents......Page 5
Organization of the Book......Page 22
Prerequisite Knowledge......Page 25
Typographic Conventions......Page 26
Main Purpose of Code......Page 27
Accessing Files and Online Resources......Page 28
Disclaimers and Limitations......Page 29
References on MATLAB and Applied Economics......Page 30
General Books on Using MATLAB......Page 31
MATLAB Explanations in This Book......Page 32
Books on Applying MATLAB for Business, Economics, and Related Fields......Page 34
Books for Other Fields......Page 35
Maxims of Business Economics......Page 36
Conclusion......Page 39
Why Practice Business Economics?......Page 40
Why Study Academic Economics?......Page 41
Software Environments......Page 42
Simulation Models vs. Spreadsheets......Page 43
Using Simulink......Page 46
When To Use GIS and Database Software......Page 47
An Admonition......Page 49
What is Design?......Page 50
Setting Up the MATLAB Workspace......Page 51
MATLAB Scripts and Functions......Page 52
Design Guidelines for m-files......Page 53
Initializing a MATLAB Model......Page 54
Introduction to Simulink Models......Page 55
Time and States in a Simulink Model......Page 56
Top View......Page 57
Other Costs Subsystems......Page 58
Style Guidelines for Models......Page 60
Organizing Simulink Models......Page 66
Initializing a Model......Page 67
Time and Solver Parameters in Simulink......Page 70
The SIM Command......Page 71
A Master Simulation Callback......Page 73
Trigger Boxes......Page 74
Complex String Arrays......Page 75
A Custom Business Economics Simulink Library......Page 77
To Make the Library Appear in the Simulink Browser......Page 78
Appendix: Master Simulation Callback......Page 79
The Importance of Data......Page 84
The Critical Need......Page 85
Getting Data from the Internet......Page 87
Getting Data From HTML Pages......Page 88
Direct Internet Data Acquisition......Page 90
Importing Your Data: A General Strategy......Page 91
Reporting Your Data......Page 92
The Diary Command......Page 93
Recommended Practices......Page 94
Uses and Limitations of Arrays......Page 95
Discussion: Spreadsheets and Databases......Page 102
Command History, Diary, and Notebook......Page 103
Limitations of HTML......Page 104
Use of XML Today: Its Use in MATLAB......Page 105
Recommendation: Plan for Future Data Exchange......Page 106
Variables in This Custom Structure......Page 108
Delimited Files......Page 114
Compressed Files......Page 115
Excel Link......Page 116
Microeconomic Theory and Practical Applications......Page 117
Comparative Statics......Page 118
Supply Function......Page 125
Desirable Qualities of the Supply Function......Page 126
Elasticity of Supply......Page 127
Putting It Together......Page 128
Graphics Techniques......Page 129
Making the Library Appear in the Simulink Browser......Page 130
Blocks for Growth Models......Page 131
Elasticity......Page 133
Purpose of the Model......Page 134
Master Simulation Callback......Page 135
Appendix......Page 140
Ethics in Economic Impact......Page 149
A Syndrome: The Missing Report......Page 150
A Sports Example: The Super Bowl......Page 151
Economic Impact of Y2K......Page 152
Economic Impact of Broadband......Page 153
An Example: The Fantasy Game......Page 154
Sum of Benefits from the Fantasy Game......Page 155
The Economics of Impact Models......Page 157
History and Current Usage......Page 158
Input–Output Equations......Page 159
The Technology Matrix......Page 160
A Robinson Crusoe Example......Page 161
Restrictive Assumptions......Page 162
Mathematics of Multiplier Analysis......Page 163
Total Output Multipliers......Page 164
Rules for the Proper Use of Multipliers......Page 165
Economic and Fiscal Impacts: City of Detroit Model......Page 169
Implementing the Model......Page 171
Schematics of the Simulink Model......Page 172
Option I: Borrow Depreciation Algorithms......Page 176
Option II: Specify Partial Adjustment Model......Page 177
Relationship between Economic and Fiscal Impacts......Page 178
On the Political Economy of Taxes......Page 179
Overview: Fiscal Impact Model......Page 180
Source Data......Page 182
Additional Technical Notes......Page 183
Appendix......Page 187
Advantages of Simulation Models......Page 192
Federal Income Taxes......Page 193
OASDI (Social Security and Medicare) Taxes......Page 194
Who Pays Payroll Taxes?......Page 195
Modeling Income and Payroll Taxes......Page 196
Tax Policy Analysis Methodology......Page 197
Results of Tax Incidence Analysis......Page 198
Fiscal Impact of Tax Policy Change......Page 200
Appendix......Page 202
Diversification and Recession Risk......Page 208
Traditional Measures of Diversification......Page 209
Recession-Severity Measure of Diversification......Page 210
Portfolio Theory Analysis......Page 211
Methodology......Page 213
Example Analysis of Cass County, MI......Page 215
Defining Sprawl......Page 216
Rural Sprawl......Page 218
Preliminary Findings......Page 219
Conclusions......Page 221
Example Calculations......Page 222
Standard Diversification Measures......Page 223
Recession-Severity Risk Statistic......Page 224
Contents of this Chapter......Page 225
Simple Uncertainty: Baseline, High, and Low Scenarios......Page 226
Trend Projection Code, Graphics, and Output......Page 227
Function Details......Page 228
Other Methods for Compound Growth Projections......Page 229
Markov Processes, States, and Uncertainty......Page 230
Problems with Simple Uncertainty......Page 231
Another Simple Uncertainty: Random Walk......Page 232
Complex Uncertainty: Geometric Brownian Motion......Page 233
Complex Uncertainty: Jump Processes......Page 235
The Value of a Financial Asset......Page 236
Deriving the Present Value of a Financial Asset......Page 237
Present Value of a Future Stream With Poisson Risk......Page 240
Income Under Uncertainty......Page 241
A Recommended Approach......Page 242
A Business Income Simulation Model......Page 243
Iterative Market Value and Tax Model......Page 244
Simplifying Assumptions Allowing an Iterative Method......Page 248
An Iterative Model to Estimate Market Value and Taxation......Page 249
Appendix: Computer Code for Selected Utility Programs......Page 253
Use of This Chapter by Readers of Different Backgrounds......Page 260
What Is To Be Valued?......Page 261
Difference between Market Value and Accounting Concepts......Page 262
Book Value and Market Value......Page 263
The Role of Economist and Accountant in Business Valuation......Page 264
Fair Market Value......Page 265
Approaches to Valuation......Page 268
Fundamental Equivalence of Methods......Page 270
Best Evidence: Market Price......Page 271
Second Best Method: Income Method......Page 272
Third Best Method: Asset-Based Methods......Page 274
The Real Options Approach......Page 276
Dynamic Programming Methods......Page 280
Information Necessary To Value a Firm......Page 284
Accounting Information......Page 285
Management Policies......Page 286
Steps To Value a Business or Estimate Damages......Page 288
Example: Beverage Distributors......Page 289
Creating the Structure......Page 291
Valuation Estimates by Multiple Methods......Page 294
Importance of Judgment......Page 298
Rational Damages......Page 299
Economics of Sanctions......Page 300
The Discount Rate......Page 302
General Principle: Match Rate with Purpose, Duration, and Risk......Page 303
Appendix......Page 307
Finance and Economics......Page 314
Mortgage Analysis......Page 315
Auto Depreciation......Page 318
Investment Portfolio Analysis......Page 320
Mean-Variance Analysis......Page 321
The GetStocks Function......Page 322
Portfolio Theory and Economic Diversification......Page 323
Growth Models and Simulink......Page 324
Credit Risk......Page 325
Appendix......Page 326
The Location Poverty of Modern Economics......Page 343
Location and the Birth of Economics......Page 344
Business Economics and Location......Page 345
The Economics of Time......Page 346
Increased Distance Means Increased Costs......Page 347
Newton’s Law of Gravity......Page 348
The Social Gravity Model: Antecedents......Page 349
The Quadratic Human?......Page 350
Retail Sales Adaptation of the Gravity Model......Page 352
Customer Location Data......Page 353
Sources of Customer Location Data......Page 354
Initial Analysis of Regional Sales Data......Page 355
Geographic Analysis of Sales......Page 356
Equal-Distance Rings......Page 357
Sales Patterns by Area......Page 358
Finding Distances......Page 361
Applying a Gravity Model to the Distance–Sales Analysis Overview......Page 364
Data Collection and Formatting......Page 367
Specifying and Estimating a Sales–Distance Model......Page 368
Nonlinear Optimization and Gravity Model Estimation......Page 373
Alternative Specification: Best-Fit Polynomials......Page 374
Comparison: Gravity and Polynomial Models......Page 375
Weaknesses of Polynomial Equations......Page 376
Conclusion: Gravity Models vs. Polynomials......Page 377
Complex Models with Additional Variables......Page 378
Projecting Total Sales: Estimation......Page 380
Defining Market Areas......Page 382
Cannibalization in Retail Franchises......Page 383
Required Data......Page 384
Changes in Total Product Sales......Page 385
Measuring Changes in Sales by Retailer......Page 386
Measuring Changes to Sales......Page 387
Purposes, Innovations, and Limitations of This Chapter......Page 389
Principles of SPC......Page 390
The Classic Shewhart Charts......Page 391
A Simple SPC Program......Page 392
A “Thin-Client” Approach......Page 394
Customizing the Application......Page 395
Extending Beyond SPC: Taguchi Methods......Page 396
Appendix......Page 397
An Extension of Boolean Logic......Page 399
Example: Selection of Investments......Page 400
History of Fuzzy Logic......Page 402
Example: Income Tax Audit Predictor......Page 403
History and Structure of the Predictor......Page 404
The Rules of the Audit Predictor......Page 405
Graphical Illustration......Page 408
Running a Fuzzy Logic System......Page 410
Variation: Simulation Models......Page 412
Using a Simple Credit Risk FIS......Page 413
Conclusion: Credit Risk Simulation Model......Page 414
Fuzzy Logic Models in Simulink......Page 416
Appendix......Page 417
The Third Wave: Complex Analysis......Page 421
Example 1: Financial Industry......Page 422
Information in This Chapter......Page 423
Choosing the Platform: Windows vs. the Web......Page 424
Calculations, Databases, and Dynamic Pages......Page 425
A Difference in Windows......Page 426
Other Differences......Page 427
Planning for the Future......Page 428
Graphics Formats......Page 429
HTML and its Limitations......Page 430
Structured Data and the Document Object Model......Page 431
Example 1: Generating Help Files......Page 432
Conclusion: Using XML in MATLAB......Page 433
Extending beyond Static Display......Page 435
Business Applications for SVG Images......Page 436
Tufte Principles......Page 437
Graphical Excellence......Page 438
Rules for Effective Graphics......Page 442
References on Graphics in MATLAB......Page 443
Line Graphs......Page 444
Pie Charts......Page 445
Bar Charts......Page 447
Adjusting Axes......Page 449
Generating Test Graphics......Page 450
Appendix......Page 451
Path Command......Page 465
Data Type Mismatches......Page 466
A Note on Operating Systems......Page 467
Data and Date Problems in Simulink Models......Page 468
Calculation Problems......Page 469
Model Structure Problems......Page 470
Common Excel Link Problems......Page 471
Other Recommendations......Page 474