Multi-layer customer relationship weighted momentum factor - based on supply chain network
factor.formula
Multi-layered customer relationship weighted momentum factor:
Calculate the weighted momentum of target i. By weighted aggregation of the momentum of its multi-layer customers (in different supply chain levels l), the impact of information transmission in the customer relationship network is taken into account.
Centrality weight:
The relative centrality weight of the edge (m,n) in the entire multi-layer network is calculated to weight the customer's momentum. The weight is based on the strength of the connection in the supply chain network and is normalized to ensure that the sum of all weights is 1.
in:
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is the weighted momentum factor of the multi-layer customer relationship of target i. The higher the value, the stronger the momentum effect of target i's customer network as a whole.
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Indicates the number of customer relationship levels considered. For example, L=1 means only direct customers are considered, L=2 means direct customers and customers of customers are considered, and so on.
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It represents the set of all edges (m,n) in the supply chain network formed by the l-th level customer relationship. For example, G1 represents the supply chain network of direct customers, and G2 represents the supply chain network of customers’ customers.
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Represents an edge in the customer relationship network of the lth layer, where m is the source node (upstream company) and n is the target node (downstream company).
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Indicates the centrality weight of edge (m,n). This weight is based on the relative importance of edge (m,n) in the entire multi-layer customer network and is calculated using the idea of Betweenness Centrality. It captures the bridge role of the edge in information transfer. The larger the value, the more important the edge is in the customer network.
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Indicates the rate of return of customer n in the past specific period of time (for example, one month). This value represents the momentum of customer n itself.
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Indicates the connection strength of edge (m,n), which usually represents the business scale in its supply chain relationship, such as sales or purchase amount. The larger the value, the larger the business scale between customers m and n, and the closer their relationship.
factor.explanation
The factor considers the momentum effect of multiple layers of relationships between customers in the supply chain network (e.g., direct customers, customers of customers, etc.) and weights them based on the concept of network centrality. The core idea is that the momentum of an underlying asset may be affected by the overall momentum of its customer network, and the degree of this influence is related to the importance and hierarchy of the customer relationship. Including deeper customer relationships can provide richer market signals than considering only direct customers, because information is often transmitted through the supply chain network. The factor is based on the following assumptions: customers with close supply chain relationships tend to have similar momentum performance, and this momentum effect will be transmitted through the network.