IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v281y2020i3p628-641.html
   My bibliography  Save this article

Deep learning in business analytics and operations research: Models, applications and managerial implications

Author

Listed:
  • Kraus, Mathias
  • Feuerriegel, Stefan
  • Oztekin, Asil

Abstract

Business analytics refers to methods and practices that create value through data for individuals, firms, and organizations. This field is currently experiencing a radical shift due to the advent of deep learning: deep neural networks promise improvements in prediction performance as compared to models from traditional machine learning. However, our research into the existing body of literature reveals a scarcity of research works utilizing deep learning in our discipline. Accordingly, the objectives of this overview article are as follows: (1) we review research on deep learning for business analytics from an operational point of view. (2) We motivate why researchers and practitioners from business analytics should utilize deep neural networks and review potential use cases, necessary requirements, and benefits. (3) We investigate the added value to operations research in different case studies with real data from entrepreneurial undertakings. All such cases demonstrate improvements in operational performance over traditional machine learning and thus direct value gains. (4) We provide guidelines and implications for researchers, managers and practitioners in operations research who want to advance their capabilities for business analytics with regard to deep learning. (5) Our computational experiments find that default, out-of-the-box architectures are often suboptimal and thus highlight the value of customized architectures by proposing a novel deep-embedded network.

Suggested Citation

  • Kraus, Mathias & Feuerriegel, Stefan & Oztekin, Asil, 2020. "Deep learning in business analytics and operations research: Models, applications and managerial implications," European Journal of Operational Research, Elsevier, vol. 281(3), pages 628-641.
  • Handle: RePEc:eee:ejores:v:281:y:2020:i:3:p:628-641
    DOI: 10.1016/j.ejor.2019.09.018
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377221719307581
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.ejor.2019.09.018?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Krauss, Christopher & Do, Xuan Anh & Huck, Nicolas, 2017. "Deep neural networks, gradient-boosted trees, random forests: Statistical arbitrage on the S&P 500," European Journal of Operational Research, Elsevier, vol. 259(2), pages 689-702.
    2. Ranyard, J.C. & Fildes, R. & Hu, Tun-I, 2015. "Reassessing the scope of OR practice: The Influences of Problem Structuring Methods and the Analytics Movement," European Journal of Operational Research, Elsevier, vol. 245(1), pages 1-13.
    3. Ritu Agarwal & Vasant Dhar, 2014. "Editorial —Big Data, Data Science, and Analytics: The Opportunity and Challenge for IS Research," Information Systems Research, INFORMS, vol. 25(3), pages 443-448, September.
    4. Charles J. Corbett, 2018. "How Sustainable Is Big Data?," Production and Operations Management, Production and Operations Management Society, vol. 27(9), pages 1685-1695, September.
    5. Hau L. Lee, 2018. "Big Data and the Innovation Cycle," Production and Operations Management, Production and Operations Management Society, vol. 27(9), pages 1642-1646, September.
    6. Panagiotis Adamopoulos & Anindya Ghose & Vilma Todri, 2018. "The Impact of User Personality Traits on Word of Mouth: Text-Mining Social Media Platforms," Information Systems Research, INFORMS, vol. 29(3), pages 612-640, September.
    7. Carbonneau, Real & Laframboise, Kevin & Vahidov, Rustam, 2008. "Application of machine learning techniques for supply chain demand forecasting," European Journal of Operational Research, Elsevier, vol. 184(3), pages 1140-1154, February.
    8. Christopher Krauss & Anh Do & Nicolas Huck, 2017. "Deep neural networks, gradient-boosted trees, random forests: Statistical arbitrage on the S&P 500," Post-Print hal-01768895, HAL.
    9. Misiunas, Nicholas & Oztekin, Asil & Chen, Yao & Chandra, Kavitha, 2016. "DEANN: A healthcare analytic methodology of data envelopment analysis and artificial neural networks for the prediction of organ recipient functional status," Omega, Elsevier, vol. 58(C), pages 46-54.
    10. Tonya Boone & Ram Ganeshan & Robert L. Hicks & Nada R. Sanders, 2018. "Can Google Trends Improve Your Sales Forecast?," Production and Operations Management, Production and Operations Management Society, vol. 27(10), pages 1770-1774, October.
    11. Raymond Yiu Keung Lau & Wenping Zhang & Wei Xu, 2018. "Parallel Aspect‐Oriented Sentiment Analysis for Sales Forecasting with Big Data," Production and Operations Management, Production and Operations Management Society, vol. 27(10), pages 1775-1794, October.
    12. Fischer, Thomas & Krauss, Christopher, 2018. "Deep learning with long short-term memory networks for financial market predictions," European Journal of Operational Research, Elsevier, vol. 270(2), pages 654-669.
    13. Chris Tofallis, 2015. "A better measure of relative prediction accuracy for model selection and model estimation," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 66(8), pages 1352-1362, August.
    14. Probst, Malte & Rothlauf, Franz & Grahl, Jörn, 2017. "Scalability of using Restricted Boltzmann Machines for combinatorial optimization," European Journal of Operational Research, Elsevier, vol. 256(2), pages 368-383.
    15. Dimitris Bertsimas & Angela King, 2016. "OR Forum—An Algorithmic Approach to Linear Regression," Operations Research, INFORMS, vol. 64(1), pages 2-16, February.
    16. Venkatesh, Kamini & Ravi, Vadlamani & Prinzie, Anita & Poel, Dirk Van den, 2014. "Cash demand forecasting in ATMs by clustering and neural networks," European Journal of Operational Research, Elsevier, vol. 232(2), pages 383-392.
    17. Achal Bassamboo & Assaf Zeevi, 2009. "On a Data-Driven Method for Staffing Large Call Centers," Operations Research, INFORMS, vol. 57(3), pages 714-726, June.
    18. Sun, Yong & Ma, Lin & Morris, Jon, 2009. "A practical approach for reliability prediction of pipeline systems," European Journal of Operational Research, Elsevier, vol. 198(1), pages 210-214, October.
    19. Lessmann, Stefan & Baesens, Bart & Seow, Hsin-Vonn & Thomas, Lyn C., 2015. "Benchmarking state-of-the-art classification algorithms for credit scoring: An update of research," European Journal of Operational Research, Elsevier, vol. 247(1), pages 124-136.
    20. Achal Bassamboo & Sandeep Juneja & Assaf Zeevi, 2008. "Portfolio Credit Risk with Extremal Dependence: Asymptotic Analysis and Efficient Simulation," Operations Research, INFORMS, vol. 56(3), pages 593-606, June.
    21. Dimitris Bertsimas & Romy Shioda, 2007. "Classification and Regression via Integer Optimization," Operations Research, INFORMS, vol. 55(2), pages 252-271, April.
    22. Chris Tofallis, 2015. "A better measure of relative prediction accuracy for model selection and model estimation," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 66(3), pages 524-524, March.
    23. Oztekin, Asil & Al-Ebbini, Lina & Sevkli, Zulal & Delen, Dursun, 2018. "A decision analytic approach to predicting quality of life for lung transplant recipients: A hybrid genetic algorithms-based methodology," European Journal of Operational Research, Elsevier, vol. 266(2), pages 639-651.
    24. Mortenson, Michael J. & Doherty, Neil F. & Robinson, Stewart, 2015. "Operational research from Taylorism to Terabytes: A research agenda for the analytics age," European Journal of Operational Research, Elsevier, vol. 241(3), pages 583-595.
    25. Kizilaslan, Recep & Freund, Steven & Iseri, Ali, 2016. "A data analytic approach to forecasting daily stock returns in an emerging marketAuthor-Name: Oztekin, Asil," European Journal of Operational Research, Elsevier, vol. 253(3), pages 697-710.
    26. David Silver & Julian Schrittwieser & Karen Simonyan & Ioannis Antonoglou & Aja Huang & Arthur Guez & Thomas Hubert & Lucas Baker & Matthew Lai & Adrian Bolton & Yutian Chen & Timothy Lillicrap & Fan , 2017. "Mastering the game of Go without human knowledge," Nature, Nature, vol. 550(7676), pages 354-359, October.
    27. Qi Feng & J. George Shanthikumar, 2018. "How Research in Production and Operations Management May Evolve in the Era of Big Data," Production and Operations Management, Production and Operations Management Society, vol. 27(9), pages 1670-1684, September.
    28. Scholz, Michael & Pfeiffer, Jella & Rothlauf, Franz, 2017. "Using PageRank for non-personalized default rankings in dynamic markets," European Journal of Operational Research, Elsevier, vol. 260(1), pages 388-401.
    29. Hu, Qiwei & Chakhar, Salem & Siraj, Sajid & Labib, Ashraf, 2017. "Spare parts classification in industrial manufacturing using the dominance-based rough set approach," European Journal of Operational Research, Elsevier, vol. 262(3), pages 1136-1163.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kim, A. & Yang, Y. & Lessmann, S. & Ma, T. & Sung, M.-C. & Johnson, J.E.V., 2020. "Can deep learning predict risky retail investors? A case study in financial risk behavior forecasting," European Journal of Operational Research, Elsevier, vol. 283(1), pages 217-234.
    2. Koen W. de Bock & Kristof Coussement & Arno De Caigny & Roman Slowiński & Bart Baesens & Robert N Boute & Tsan-Ming Choi & Dursun Delen & Mathias Kraus & Stefan Lessmann & Sebastián Maldonado & David , 2023. "Explainable AI for Operational Research: A Defining Framework, Methods, Applications, and a Research Agenda," Post-Print hal-04219546, HAL.
    3. Kriebel, Johannes & Stitz, Lennart, 2022. "Credit default prediction from user-generated text in peer-to-peer lending using deep learning," European Journal of Operational Research, Elsevier, vol. 302(1), pages 309-323.
    4. Kolesnikova, A. & Yang, Y. & Lessmann, S. & Ma, T. & Sung, M.-C. & Johnson, J.E.V., 2019. "Can Deep Learning Predict Risky Retail Investors? A Case Study in Financial Risk Behavior Forecasting," IRTG 1792 Discussion Papers 2019-023, Humboldt University of Berlin, International Research Training Group 1792 "High Dimensional Nonstationary Time Series".
    5. Kamaladdin Fataliyev & Aneesh Chivukula & Mukesh Prasad & Wei Liu, 2021. "Stock Market Analysis with Text Data: A Review," Papers 2106.12985, arXiv.org, revised Jul 2021.
    6. Jung, Sang Hoon & Jeong, Yong Jin, 2020. "Twitter data analytical methodology development for prediction of start-up firms’ social media marketing level," Technology in Society, Elsevier, vol. 63(C).
    7. Acciarini, Chiara & Cappa, Francesco & Boccardelli, Paolo & Oriani, Raffaele, 2023. "How can organizations leverage big data to innovate their business models? A systematic literature review," Technovation, Elsevier, vol. 123(C).
    8. Huck, Nicolas, 2019. "Large data sets and machine learning: Applications to statistical arbitrage," European Journal of Operational Research, Elsevier, vol. 278(1), pages 330-342.
    9. Kentaro Imajo & Kentaro Minami & Katsuya Ito & Kei Nakagawa, 2020. "Deep Portfolio Optimization via Distributional Prediction of Residual Factors," Papers 2012.07245, arXiv.org.
    10. Xiangyu Chang & Yinghui Huang & Mei Li & Xin Bo & Subodha Kumar, 2021. "Efficient Detection of Environmental Violators: A Big Data Approach," Production and Operations Management, Production and Operations Management Society, vol. 30(5), pages 1246-1270, May.
    11. Zhou, Hao & Kalev, Petko S., 2019. "Algorithmic and high frequency trading in Asia-Pacific, now and the future," Pacific-Basin Finance Journal, Elsevier, vol. 53(C), pages 186-207.
    12. Alexander Jakob Dautel & Wolfgang Karl Härdle & Stefan Lessmann & Hsin-Vonn Seow, 2020. "Forex exchange rate forecasting using deep recurrent neural networks," Digital Finance, Springer, vol. 2(1), pages 69-96, September.
    13. Flori, Andrea & Regoli, Daniele, 2021. "Revealing Pairs-trading opportunities with long short-term memory networks," European Journal of Operational Research, Elsevier, vol. 295(2), pages 772-791.
    14. Xiaodan Zhu & Anh Ninh & Hui Zhao & Zhenming Liu, 2021. "Demand Forecasting with Supply‐Chain Information and Machine Learning: Evidence in the Pharmaceutical Industry," Production and Operations Management, Production and Operations Management Society, vol. 30(9), pages 3231-3252, September.
    15. Jian Ni & Yue Xu, 2023. "Forecasting the Dynamic Correlation of Stock Indices Based on Deep Learning Method," Computational Economics, Springer;Society for Computational Economics, vol. 61(1), pages 35-55, January.
    16. Tony Guida & Guillaume Coqueret, 2019. "Ensemble Learning Applied to Quant Equity: Gradient Boosting in a Multifactor Framework," Post-Print hal-02311104, HAL.
    17. Rubesam, Alexandre, 2022. "Machine learning portfolios with equal risk contributions: Evidence from the Brazilian market," Emerging Markets Review, Elsevier, vol. 51(PB).
    18. Pushpendu Ghosh & Ariel Neufeld & Jajati Keshari Sahoo, 2020. "Forecasting directional movements of stock prices for intraday trading using LSTM and random forests," Papers 2004.10178, arXiv.org, revised Jun 2021.
    19. Elizabeth Fons & Paula Dawson & Xiao-jun Zeng & John Keane & Alexandros Iosifidis, 2020. "Evaluating data augmentation for financial time series classification," Papers 2010.15111, arXiv.org.
    20. Fabian Waldow & Matthias Schnaubelt & Christopher Krauss & Thomas Günter Fischer, 2021. "Machine Learning in Futures Markets," JRFM, MDPI, vol. 14(3), pages 1-14, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:281:y:2020:i:3:p:628-641. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.