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The Ordered Weighted Average Sector Liquid Return Index: A Method for Determining Financial Recovery from Sectoral Debt

Author

Listed:
  • Salvador Linares-Mustarós

    (Department of Business Administration, University of Girona, C. Universitat de Girona 10, 17071 Girona, Spain)

  • Maria Àngels Farreras-Noguer

    (Department of Business Administration, University of Girona, C. Universitat de Girona 10, 17071 Girona, Spain)

  • Joan Carles Ferrer-Comalat

    (Department of Business Administration, University of Girona, C. Universitat de Girona 10, 17071 Girona, Spain)

  • José M. Merigó

    (School of Information, Systems and Modelling, Faculty of Engineering and Information Technology, University of Technology Sydney, 81 Broadway, Ultimo, NSW 2007, Australia)

Abstract

The primary aim of this article is to demonstrate that using the average of ratios as a representative value for measuring the health of a sector does not constitute a valid procedure. After mathematically demonstrating this objective, the article will then focus on introducing a new index for estimating the potential debt return value for a sector or group of companies. Next, the article details the start of the process for creating a new index to improve investors’ understanding of the risk associated with a sector or a group of companies meeting short-term obligations based on assigned probabilities of future sales. Given that said value is intended to represent an indicator of expected liquid solvency, its construction will take treasury tensions into account. An Ordered Weighted Average type of aggregation function is used to aggregate the magnitudes in this scenario. Consequently, the second objective of the present work is the creation of this index, which provides an initial estimate of how much money can be recovered from a sector’s debt.

Suggested Citation

  • Salvador Linares-Mustarós & Maria Àngels Farreras-Noguer & Joan Carles Ferrer-Comalat & José M. Merigó, 2023. "The Ordered Weighted Average Sector Liquid Return Index: A Method for Determining Financial Recovery from Sectoral Debt," Mathematics, MDPI, vol. 11(23), pages 1-12, November.
    • Handle: RePEc:gam:jmathe:v:11:y:2023:i:23:p:4839-:d:1291963
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    References listed on IDEAS

    as
    1. Germ`a Coenders & N'uria Arimany Serrat, 2023. "Accounting statement analysis at industry level. A gentle introduction to the compositional approach," Papers 2305.16842, arXiv.org, revised Feb 2024.
    2. Pol Jofre-Campuzano & Germà Coenders, 2022. "Compositional Classification of Financial Statement Profiles: The Weighted Case," JRFM, MDPI, vol. 15(12), pages 1-17, November.
    3. Alexander Zorn & Michele Esteves & Ivo Baur & Markus Lips, 2018. "Financial Ratios as Indicators of Economic Sustainability: A Quantitative Analysis for Swiss Dairy Farms," Sustainability, MDPI, vol. 10(8), pages 1-20, August.
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