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Visualising Finance
by Juan C. Dürsteler [message nº 77]

Finance makes extensive use of tables and spreadsheets in order to represent its data. Information Visualisation is slowly penetrating this field.

The chart with an irregular line depicting the results of a company has become a stereotype of financial information. But still today most of the financial documents of the companies are usually cumbersome spreadsheets full of data. Although this doesn’t pose any problems for people used to them, they have some limitations.

  • Financial information is typically multidimensional: there are a great deal of variables to take into account when studying a particular phenomenon. Taking in all this complexity by looking at a certain amount of tables and spreadsheets is not an easy task and requires certain practice.

  • On the other hand, detecting specially interesting patterns of financial behaviour just by looking at many spreadsheets requires a non negligible amount of time for the study and assessment of the vast amount of data involved.

Despite the fact that much research reinforces the common notion that human cognition takes place primarily in visual form, using visualisation is penetrating in the financial field quite slowly.

One of the most clear examples of this type of visualization is Smart Money. As we already wrote in issue number 52 when speaking about TreeMaps technology, SmartMoney summarises the values of 500 stocks in only one picture. Each value is depicted by a rectangle whose colour shows the percentage or appreciation (in green) or devaluation (in red). If it has no change the colour is black. Its size is proportional to the market capitalisation. 

This way, just by glancing at it, we can have an idea of which values are going up or down. Once you have identified an interesting stock you can obtain more information about it in order to make a better purchase decision just by clicking on its corresponding rectangle. Can you imagine the difference with a spreadsheet of 500 rows with many columns each?. 

Recently SmartMoney, cooperating with Morning Star have launched a TreeMap devoted to mutual funds. In this TreeMap you can appreciate at a glance the aspect (literally somewhat obscure at this moment) that offers the profitability of 1000 investment funds. 

Neovision commercialises three financial visualisation products that are based on a somewhat similar technology called HeatMaps. This technology represents data in real time by means of a regular mosaic of coloured rectangles. Each rectangle refers to a financial instrument, a value of the portfolio we want to monitor or, in general, whatever variable of financial interest. The colour represents the value of said variable.

Neovision has a variant devoted to risk analysis called RiskMaps and a web version of HeatMaps. All these tools are customisable and reconfigurable through an editor that allows you to define the features that the end application will have, depending on the needs of the user.

In its own way, IBM takes advantage of its Visualization Data Explorer, a general purpose tool, in order to build some interesting financial visualisation applications, that you can see at the application gallery.

For some years companies like J.P.Morgan have been devoting people to the research of the possibilities of information visualisation (see for example one of their articles).

Personally, I don’t have any doubt that financial visualisation will spread eventually, becoming ubiquitous in the field, but we have a long road ahead of us in order to introduce new techniques allowing executives and financial analysts to visualise large amounts of multidimensional data in an easy and intuitive way. 

Especially when the target of these systems are people used to making decisions with the good old spreadsheet and having little time left to spend on collateral techniques unless they are very easy to apprehend.

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