A new paper co-authored by Assistant Professor Emily Wang finds that programs like a feed forward neural network might help lower financial risk while offering higher returns for investors who buy stock in companies that have announced plans to merge.
Ever wonder how to make smarter investment decisions? Emily Wang has some insights.
An article co-authored by the assistant professor of finance in a recent issue of Finance Research Papers explores the power of smart computer programs in making investment choices – specifically, merger arbitrage, where investors buy stock in a company after the business announces merger plans.
It’s not as simple as it sounds. Investors face risks like the deal not happening, the price going down, or the deal taking longer than expected. Wang and two colleagues wanted to see if using smart computer programs could make these investment decisions safer and more profitable.
Their study uses a feed-forward neural network, a type of machine learning program that analyzes company information, deal specifics, target details, and economic factors. The program then gives investors a probability of whether the merger will succeed or fail.
The team concluded that its FFNN performed better than eight other simulated hedge funds while making safer and more profitable investment choices. Wang expresses a commitment to ongoing exploration. She emphasizes the importance of continuous research to delve deeper into the intricacies of machine learning programs, aiming to discern their effectiveness and potential limitations in the realm of investment decision-making.
“The Application of Feed Forward Neural Networks to Merger Arbitrage: A Return-Based Analysis” in Finance Research Papers was co-authored with Declan Braun and Yue Han.
Wang joined the faculty of the Martha and Spencer Love School of Business this summer after two years with Le Moyne College. She earned her doctorate in finance from Oklahoma State University and joined the Elon faculty with scholarly interests in corporate finance, investment, and cybersecurity.
Wang teaches courses in financial management, investments, principles of finance, financial markets and institutions, and general insurance.