The GFCI provides ratings for financial centres calculated by a ‘factor assessment model’ that uses two distinct sets of input:
Financial centres are added to the GFCI questionnaire when they receive five or more mentions in the online questionnaire in response to the question: “Are there any financial centres that might become significantly more important over the next 2 to 3 years?” A centre is only given a GFCI rating and ranking if it receives more than 150 assessments from other centres within the previous 24 months in the online survey. Centres in the GFCI that do not receive 50 assessments in a 24 month period are removed and added to the Associate list until the number of assessments increases.
At the beginning of our work on the GFCI, a number of guidelines were set out. Additional Instrumental Factors are added to the GFCI model when relevant and meaningful ones are discovered:
Creating the GFCI does not involve totaling or averaging scores across instrumental factors. An approach involving totalling and averaging would involve a number of difficulties:
The guidelines for financial centre assessments by respondents are:
The financial centre assessments and instrumental factors are used to build a predictive model of centre competitiveness using a support vector machine (SVM). SVMs are based upon statistical techniques that classify and model complex historic data in order to make predictions on new data. SVMs work well on discrete, categorical data but also handle continuous numerical or time series data. The SVM used for the GFCI provides information about the confidence with which each specific classification is made and the likelihood of other possible classifications.
A factor assessment model is built using the centre assessments from responses to the online questionnaire. Assessments from respondents’ home centres are excluded from the factor assessment model to remove home bias. The model then predicts how respondents would have assessed centres with which they are unfamiliar by answering questions such as:
Financial centre predictions from the SVM are re-combined with actual financial centre assessments (except those from the respondents’ home centres) to produce the GFCI – a set of financial centre ratings. The GFCI is dynamically updated either by updating and adding to the instrumental factors or through new financial centre assessments. These updates permit, for instance, a recently changed index of rental costs to affect the competitiveness rating of the centres.
The process of creating the GFCI is outlined diagrammatically below:
It is worth drawing attention to a few consequences of basing the GFCI on instrumental factors and questionnaire responses:
Part of the process of building the GFCI is extensive sensitivity testing to changes in factors of competitiveness and financial centre assessments. There are over ten million data points in the current model. The accuracy of predictions given by the SVM are regularly tested against actual assessments.