The use of fuzzy logic and expert systems for rating and pricing firms: A new perspective on valuation
Abstract
Purpose
The purpose of the paper is to focus on the rating, ranking and valuing of firms.
Design/methodology/approach
Fuzzy logic and expert systems are used in order to provide a score for the firm(s) under consideration, representing the firm value‐creating power.
Findings
The fuzzy expert system introduced is capable of dealing with both quantitative and qualitative variables and integrates financial, managerial and strategic variables. A sensitivity analysis corroborates the model.
Research limitations/implications
The system is apt to rate and rank firms within a sector. Some regression analysis can lead to a determined price for the target firm.
Practical implications
The expert system may be used by rating agencies for ranking firms, and by financial analysts and potential buyers to furnish a price for acquisition.
Originality/value
The use of a fuzzy expert system for ranking firms within a sector and pricing firms is a first attempt at an alternative way of measuring performance and value.
Keywords
Citation
Malagoli, S., Magni, C.A. and Mastroleo, G. (2007), "The use of fuzzy logic and expert systems for rating and pricing firms: A new perspective on valuation", Managerial Finance, Vol. 33 No. 11, pp. 836-852. https://doi.org/10.1108/03074350710823818
Publisher
:Emerald Group Publishing Limited
Copyright © 2007, Emerald Group Publishing Limited