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A quantitative perspective of Porter's industry forces framework for investment analysis

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  • Sang Hoon Jung
  • Yong Jin Jeong

Abstract

Porter's industry forces framework is an important tool for external analysis of firms, but its qualitative nature presents numerous limitations to be used in investment analysis. This study introduces a quantitative perspective of the framework using financial information proxies. This allows investors to gauge the external factors quantitatively and to gain enhanced framework usability. In order to test its validity, the correlation movements of our quantitative perspective have been analysed. For demonstration of enhanced usability, our quantitative perspective, alongside machine learning models, was used to predict business performances. The empirical results indicate that our quantitative perspective of the framework corroborates with its original definition and that it exhibits enhanced usability than the original framework.

Suggested Citation

  • Sang Hoon Jung & Yong Jin Jeong, 2022. "A quantitative perspective of Porter's industry forces framework for investment analysis," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(1), pages 48-64, January.
    • Handle: RePEc:wly:mgtdec:v:43:y:2022:i:1:p:48-64
    DOI: 10.1002/mde.3358
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    References listed on IDEAS

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    Cited by:

    1. Jacques Bughin, 2023. "Are you resilient? Machine learning prediction of corporate rebound out of the Covid‐19 pandemic," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1547-1564, April.

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