The Guiding Significance of Financial Models in Investment Decision-Making

Abstract

Financial models play a crucial role in modern investment decision-making due to the increasing complexity of financial markets. Through data analysis and modeling techniques, financial models not only assist investors in effectively identifying, evaluating, and managing risks but also provide strong support in optimizing investment portfolios, formulating rational asset pricing, and designing innovative investment strategies. This paper explores the role of financial models in enhancing the scientific nature of investment decisions, improving risk control capabilities, and supporting strategic innovation. It systematically analyzes the application of financial models in risk assessment, portfolio management, asset pricing and valuation, and strategy design, summarizing their guiding significance in investment decision-making. The paper also proposes corresponding improvement directions for the future development and application of financial models, including the limitations related to assumptions, data requirements, and market dynamics.