MANAGING INVESTING DATA WITH
VERY SIMPLE QUANTITATIVE TOOLS
Niculae V. MIHAITA, PhD
Cybernetics, Statistics and Economic Informatics Department,
University of Economics at the Academy of Economic Studies
in Bucharest, ROMANIA
ABSTRACT
Starting with Clarke and Groves incentive-
compatible mechanism for three Big Investors (State
departments) involved in building an Amusing Park.
The paper illustrate how combination of simple
quantitative methods reveals hidden scenarios.
The first part of this paper deals with true and false
money assignments, the second part deals with
small investors where the data they used are
resulting from a payoff matrix proportional with the
data of Big Investors investments (big monetary
units, b.m.u.) in projects, in the third part it is
shown what is happen if one Big Investor lies.
The paper content also has results and comments of
an original algorithm of factorial experiments and
Informational Statistics combination, adding more
information to find strong, weak, hidden, false or
illusory relationships between true and false
promises.
Keywords — Informational Statistics, Factorial
Experiments 2^3, Preferences for public goods, Pure
values, Potential relationships.
INTRODUCTION
Three Big Investors (State departments) are
involved in building an Amusing Park, Dracula
Land, in Water facilities (W), Energy (E),
Construction (C). Dracula Land could be at Bran, at
Sighisoara or at Snagov.
The combination of simple quantitative methods can
reveals hidden scenarios. The three projects are
discussed and in each is implied a different Big
Investor but the projects needs money for all three
to be realized. The first part of this paper deals with
true and false money assignments. From different
scenarios feed-back results an ethical question
appear: it is good to lie? Because using only
arithmetic calculus and knowing the rules some
players could win more, as it is shown and
exemplified.
We are dealing with small investors where the data
they used are resulting from a payoffs matrix
identical (for the KISS principle, keep it simple
simple) with the data of Big Investors investments
in projects. The feed-before information for a small
investor is that the sum of money he wanted to win
after a certain period of time agreed by a contract to
be ten monetary units (10 m.u.) no matter what
project is made (risk avoiding). He compute the
pure values, values that pay one m.u. in case of it is
realized the project (state) for which it was created
at the end of a determined period and zero if it is
realized. The small investor wants to win no matter
what project is made same sum of money so he buy
all the states-projects. The sum of pure values is
less than 1 so the differences are the gains.
If one Big Investor lies, two situations happen:
1) Big Investors remain with more money,
some hidden or even more if they lie
(announcing less money to invest) even if
they must pay penalties;
2) Small investors paying the same sum of
money win and receive less and less and the
risk is bigger if Big Investors lie (because
small ones difficulties in identifying feed-
before money information).
It is performing in the paper some old and new
algorithms as minimizing risk by minimizing data
variance or optimizing promised money covariance. The Department of Water values option for three
Informational Statistics is used to determine Big locations are 50, 20, 10. Without this department,
Investors will to build their projects, information the total value of remaining money for the three
sometimes tricky for small investors when the locations are 50, 70, 75 respectively. Thus option
changing minds happens in the case of Big ones. Snagov will be chosen. Since the Water intention
changes the outcome from option Bran to Snagov,
CLARKE-GROVES TAX the Clarke-Groves tax will be 75-50=25. If Snagov
FOR PUBLIC GOODS is chosen, Water dept. gets a benefit of 10 monetary
units. By revealing its preferences, Water sees that
This is the mechanism by which even self-interested option Bran is chosen. Water dept. increase in
individuals are induced to reveal their true benefit is 40. The net benefit after tax is 40-25 = 15.
preferences [2]. In our case, three State departments If Energy is out of business, its intention does not
(rows) wanted to invest in three locations for an change the outcome and it pays no tax.
Amusing Park (Dracula Land in Romania). We are Without C, the total values for options are 60, 80,
using only arithmetic calculus and knowing the 30. Thus, option Sighisoara will be chosen. Since C
rules some players could win more, as it is shown intention of retreat changes the outcome from
and below exemplified, in the next tables. location Bran to Sighisoara, C's tax is 80-60=20.
The benefit to C from this retreat is 40-10=30. The
Table 1 – initial discussion, big State investors net benefit after tax is 30-20=10.
Dracula Land Initial discussion
Big investors Bran Sighisoara Snagov Small investors used data resulting from a winnings
Water 50 20 10 matrix identical of Big Investors investments in
Energy 10 60 20 projects.. He compute the pure values, values that
Construction 40 10 55 pay one u.m. in case of it is realized the project
Chosen 100 90 85 (state) for which it was created at the end of a
determined period and zero if it is not realized.
Big investors are in Water facilities (W), Calculation of pure values is presented in table 4
Energy (E), Construction (C). If W is out of
game, his net profit is 15 and Dracula Land Table 4 – Payoffs for 10 u.m. based on table 1 data
could be at Snagov by association E with C. Bran Sighisoara Snagov
50 20 10
Table 2 – without W, E or C 10 60 20
Dracula Land Bran Sighisoara Snagov 40 10 55
E+C 50 70 75 Matrix 3X3 Last line is = column sum
W+C 90 30 65 matrix inverse summed by column (suggesting)
W+E 60 80 30
2.26 -0.73 -0.15
0.18 1.72 -0.66
If E is out of game, it is not punished and -1.68 0.22 2.04
Dracula Land could be at Bran by association 0.76 1.21 1.23
of C with W. If C is out of game, its net profit is
10 and Dracula Land could be at Sighisoara by
W in association with E. - and rows, giving pure values
0.138 7.2 times
Table 3 – penalty, savings and gains 0.124 8.1 times
on profit Penalty Savings gains 0.058 17.1 times
Water 25 40 15 0.321 3.1 times
Energy 0
Construction 20 30 10 To illustrate, MINV is10 times bigger. The Sum on
The explanation is following here: initially the total column values suggest avoiding risk, same value to
attracted value is 100 for Bran Castle location. win if buying payoffs proportionally.
We present below (table 5, table 6, table 7, table 8) We present in table 9, table 10, table 11, table 12
the same algorithm for the case: The white lie of the algorithm for the case: The big lie of
Construction, not interested in Bran, less money Construction, no Dracula Land in Snagov (-35),
for Bran (-30), Water Sighisoara (-10) but for Bran Castle, Yes.

Table 5 – Construction, not interested in Bran Table 9 – Construction, not interested in Snagov
Big investors Bran Sighisoara Snagov Big investors Bran Sighisoara Snagov
Water 50 10 10 Water 50 10 10
Energy 10 60 20 Energy 10 61 19
Construction 10 10 55 Construction 40 10 20
Chosen 70 80 85 Chosen 100 80 85

Table 6 – without W, E or C, based on table 5 data Table 10 – without W, E or C, based on table 9 data
Dracula Land Bran Sighisoara Snagov Dracula Land Bran Sighisoara Snagov
E+C 20 70 75 E+C 50 71 39
W+C 60 20 65 W+C 90 30 30
W+E 60 70 30 W+E 60 81 29

Table 7 – penalty, savings and gains, C lie Table 11 – penalty, savings and gains, C lie (-35)
on profit penalty savings gains lie on profit penalty savings gains lie
Water 0 + 10 Water 21 30 9
Energy 0 Energy 0
Construction 20 45 5 +30 Construction 20 30 9 35 + 10
BRAN CASTEL NO, SNAGOV YES! + 40 NO SNAGOV BUT BRAN CASTLE AND A
LOT OF MONEY!
Calculation of pure values based on table 5 data is
presented in table 8 Calculation of pure values based on table 9 data is
presented in table 12
Table 8 - Payoffs for 10 u.m. based on table 5 data
Bran Sighisoara Snagov Table 12 - Payoffs for 10 u.m. based on table 9 data
50 10 10 Bran Sighisoara Snagov
10 60 20 50 20 10
10 10 55 10 61 19
Matrix 3X3 Last line is = column sum 40 10 20
Matrix 3X3 Last line is = column sum

matrix inverse with columns summation and matrix inverse with columns summation and
2.12 -0.31 -0.27 2.62 -0.76 -0.59
-0.24 1.81 -0.61 1.42 1.53 -2.16
-1.34 -0.27 1.98 -5.95 0.76 7.25
1.09 -1.91 1.53 4.50
1.54 1.23
- rows summation, pure values - rows summation, pure values
0.1544 0.127 7.9 times
6.5 times
0.096 0.079 12.7 times
10.5 times
0.137 0.206 4.9 times
7.3 times
0.412 2.4 times
0.387 2.6 times
We present below (table 13, table 14, table 15, table We present in table 17, table 18, table 19, table 20
16) algorithm for the case: The big lies of Water the algorithm for the case: The big lies of all of
and Energy, less money for Bran (-20) and them, less money for Bran (-20), Sighisoara (-40),
Sighisoara (-40) Snagov (-35)

Table 13 – Water and Energy, less money for Bran Table 17 – Construction, not interested in Snagov
and Sighisoara Big investors Bran Sighisoara Snagov
Big investors Bran Sighisoara Snagov Water 30 10 10
Water 30 20 10 Energy 10 20 20
Energy 10 20 20 Construction 20 10 20
Construction 40 10 55 Chosen 60 40 50
Chosen 80 50 85

Table 14 – without W, E or C, based on table 13 Table 18 – without W, E or C, based on table 17

data data
Dracula Land Bran Sighisoara Snagov Dracula Land Bran Sighisoara Snagov
E+C 50 70 75 E+C 30 30 40
W+C 70 30 65 W+C 50 20 30
W+E 40 40 30 W+E 40 30 30

Table 15 – penalty, savings and gains, W, E lies Table 19 – penalty, savings and gains, all lies
on profit penalty savings gains lie on profit penalty savings gains lies
Water 0 + 20 Water 30 20 10 + 30
Energy 5 10 5 = 5+40 Energy 0 + 40
Construction Construction 0 + 55
Persuation on Bran 10 15 5
NO SIGHISOARA, BUT BRAN AND MONEY
Persuation on Sighisoara
FOR CONSTRUCTION
10 45 35

Calculation of pure values based on table 17 data is

Calculation of pure values based on table 13 data is
presented in table 20
presented in table 16

Table 20 - Payoffs for 10 u.m. based on table 17

Table 16 - Payoffs for 10 u.m. based on table 13
Bran Sighisoara Snagov
Bran Sighisoara Snagov
30 10 10
30 20 10
10 20 20
10 20 20
20 10 20
40 10 55
Matrix 3X3 Last line is = column sum
Matrix 3X3 Last line is = column sum
matrix inverse with columns summation and
matrix inverse with columns summation and
4.00 -2.00 0.00
3.60 -4.00 0.80
4.00 8.00 -10.00
1.00 5.00 -2.00
-6.00 -2.00 10.00
-2.80 2.00 1.60
2.00 4.00 0.00
1.80 3.00 0.40
- rows summation, pure values - rows summation, pure values
0.040 0.200 5.0 times
25.0 times
0.200 5.0 times
0.400 2.5 times
0.200 5.0 times
0.080 12.5 times
0.600 1.7 times
0.520 1.9 times
Some conclusions: If W is out of game, the net wining matrix if the agreed period for repaying
profit is 15 b.m.u and Dracula Land could be at is short enough. Chances are ever better for
Bran by association with C. If E is out of game, investing in Construction facilities with two
it is not punished and Dracula Land could be at possibilities to win four times and 5,5
Sighisoara by association with W. If C is out of respectively. But our investor is risk avoiding
game, the net profit is 10 b.m.u. and Dracula so he prefers the same sum, quite small.
Land could be at Snagov by association with E.
If they lie, the projects has less money to invest FACTORIAL EXPERIMENTS APPLICATION
and may be poor quality.
Analytically the generalization of the standard, The paper content also has an original
timeless, microeconomics analysis under algorithm of experimental simulation adding
certainty to a multiperiod economy under more information to factorial experiments
uncertainty with securities markets is facilitated application and find strong, weak, hidden, false
by the concept of pure security. A pure or or illusory relationships between true and false
primitive security is defined as a security that promises.
pays $1 at the end of the period if a given state Table 21 - Investments based on table 1and table 9
occurs and nothing if any other state occurs. Dracula
A Land B Grand
The concept of the pure security allows the investors Sighisoara Snagov Total
logical decomposition of market securities into Energy 6o 20 80
portfolios of pure securities. Thus every market construction 10 55 65
security may be considered a combination of Total TRUE 70 75 145
various pure securities [1]. Energy 61 19 80
Our small investor is one of risk-avoiding construction 10 20 30
temperament and want invest 10 monetary units Total C-lies 71 39 110
(m.u.) and win the same sum of money no Grand Total 141 114 255
matter what location finally will be chosen.
Following our scenarios he could receive one ITEM alternative
m.u. if he pays initially 0,32 m.u. (see Table 4, investors Energy
two times more) but following the process, only Dr Land Sighisoara
0,4 m.u., paying 0,6 m.u. for receiving one (see Assertion it is ok
investors Energy Dr Land Sighisoara
Table 20). If he is a risk-taking and chose
investors Energy Assertion cons lies
Dracula Land as made nearby the Bran Castle at
Dr Land Snagov Assertion it is ok
the end of an agreed period the payment will be investors Assertion Dracula Land
5 times more if the investment is for W Energy it is ok Sighisoara
facilities, two times for Sighisoara, payee, the Energy cons lies Sighisoara
same W and the investor receive the money
back if the construction of Dracula Land is No matter of lies, the existing relationship
made in Snagov Park. If he wanted to know shows Sighisoara as location. There is no
how much value is into one b.m.u. invested by relation between location and truth/lie
W, his 10 m.u. contains 50 b.m.u multiplied by assertions, but introducing the third variable,
Bran pure value is o,138 + 20 b.m.u. multiplied investors, it result that if C is a fair player the
by Sighisoara pure value, o,124 + 10 b.m.u. location could be Snagov.
multiplied by Snagov pure value, o,058.
If the investment is made for Energy facilities, In conclusion it is shown how measuring
the small investor could receive six times more informational gains of a triad of attributes by
if he invest in Sighisoara, two times for Snagov Informational Statistics we could find positive
and receive money back if the Dracula Land is and negative interactions and the potential
build at Bran Castel. It is a very attractive
informational change helping to build new in the jungle of semistructured Matrix, with only
scenarios. „defining attributes― as our flimsy snare.

Table 22 – Informational Statistics results In the first part of this paper it was shown how
if one Big Investor lies, two situations happen:
Quantity of subtle information received 1) Big Investors remain with more money,
A from C A from B A int BC some hidden or even more if they lie
30,3% 80,2% 81,3% announcing less money to invest) and quite if
B from A B from C B int AC they must pay penalties and they are not
96,1% 68,0% 96,3% constructing;
C from A C from B C int AB 2) Small investors paying the same sum of
58,4% 52,8% 67,2%
money win and receive less and less and the
risk is bigger if Big Investors lie (because small
INTERACTION
investors Assertion Dracula Land info.gain
ones difficulties in identifying feed-before
FALSE,ILLUSIVE Same structure Sighisoara 0%
information).
RELATION weak distorsion Snagov 4% It is performing in the paper some old and
new algorithms as minimizing risk by
minimizing data variance or optimizing
weak promised money covariance. Informational
distorsions POTENTIAL
Statistics is used to determine Big Investors will
Assertion investors Dracula Land info.gain
to build their projects, information sometimes
FALSE,ILLUSIVE same structure Sighisoara 0%
tricky for small investors when the changing
RELATION weak distorsion Snagov 4%
minds happens in the case of Big ones.
Dracula Land
3% no infogain RELATION In the end of the paper content it shows results
RELATION obtained by using an original Informational
A= Investors 26% powerful Statistics algorithm of experimental simulation
# adding more information to factorial
Informational 0,532 ENERGY experiments application and find strong, weak,
adjusted = 6% just a hint of information hidden, false or illusory relationships between
processes.
The operative word in analyzing the DATA is
„relationship―. The relationship concept, albeit
simplicity itself, has tested any manner of
perspicacity to which many authors may previously References
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