Automating Financial modelling
Hi,
I thought of an idea a few days back which I thought was pretty good, but the fact that it has not been used or brought to market already raised a few questions. Are there any automated modelling programs that can replace analysts' excel work? I know this is becoming somewhat popular in the legal industry, where alot of the junior level lawyers and paralegals' jobs can be replaced by programs and software. Is there anything of the kind as far as IB goes? If so, what is stopping them from becoming more widespread? If not, what are the barriers and challenges to creating such programs? I don't know much about modelling as I am only a first year uni student, so pardon me if my question is dumb.
Thank you.
The truth is that for mediocre/simple valuation stuff, such tools exist within Bloomberg and FactSet as of now. The real issue is that valuation requires a lot of attention to qualitative details, which can't be automated. To the extend that it can be automated (the extent you are probably thinking right now), they already exits/banks have templates.
I have heard of financial modelling being outsourced to firms in india that hire students with masters accounting degrees to do it. I think there has been a lot of undeserved mystique surrounding financial modelling from incoming analyst.
Too many complexities or adjustments to make the time required to check it all not worthwhile. Personally, I would rather do myself and check, as opposed to having to check somebody elses work. Something automated may not have the flexibility which is required for a different situation/scenario. Having worked on mainly buyside deals myself, I know the pain of having to restructure models in order for them to be driven off different assumptions. Having a deep familiarity of the model, through building it yourself, makes this task much much easier.
Also, I imagine it could be quite difficult to justify M&A fees to clients when all automated too.
its pretty easy to build a CapitalIQ valuation model. But then again you have to scrub the hell out of all those numbers
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