Creating a financial profile test : factors that impact the financial risk tolerance of individuals and their financial profile classification

The research paper “Creating a financial profile test – factors that impact the financial risk tolerance of individuals and their financial profile classification” was written by Florentine Kügler and examines how to construct a financial profile test based on the concept of financial risk tolerance while considering other significant factors. Previous research has shown that the concept is multidimensional and is significantly affected by sociodemographic variables as well as the level of financial literacy. When assessing financial literacy, it is important to acknowledge that the self-assessment of financial literacy is barely representative of a person's actual level of knowledge. In this paper financial literacy was measured through self-assessment and three test questions on compound interest, inflation, and diversification. Financial risk tolerance was measured through a questionnaire, which assessed several dimensions. This allowed testing the impact of financial literacy and sociodemographic factors on financial risk tolerance. Afterwards, a cluster analysis was applied to characterize the financial profiles. The results showed that gender, income, and age have a significant impact on financial risk tolerance, as opposed to financial literacy and education, which is in strong contrast to existing research. In terms of financial profiling, the analysis found that individuals can be classified into low, medium, and high risk tolerance profiles in combination with income, gender, and age.O trabalho de investigação "Teste de perfil financeiro - factores que influenciam a tolerância ao risco financeiro dos indivíduos e a classificação do seu perfil financeiro" foi escrito por Florentine Kügler e analisa a construção de um teste de perfil financeiro com base no conceito de tolerância ao risco financeiro, considerando outros factores significativos. Estudos anteriores mostraram que o conceito é multidimensional e significativamente afectado por variáveis sociodemográficas, bem como pelo nível de literacia financeira. Ao avaliar a literacia financeira, é importante reconhecer que a auto-avaliação da literacia financeira não corresponde ao nível real de conhecimentos de uma pessoa. Neste estudo, a literacia financeira foi medida através de uma auto-avaliação e de três perguntas sobre juros compostos, inflação e diversificação. A tolerância ao risco financeiro foi medida através de um questionário que avaliava várias dimensões. Isto permitiu examinar o impacto da literacia financeira e dos factores sociodemográficos na tolerância ao risco financeiro. Posteriormente, foi aplicada uma análise de clusters para caracterizar os perfis financeiros. Os resultados mostraram que o género, o rendimento e a idade têm um impacto significativo na tolerância ao risco financeiro, ao contrário da literacia financeira e da educação, o que contrasta fortemente com a pesquisa existente. Em termos de perfil financeiro, a análise revelou que os indivíduos podem ser classificados em perfis de tolerância ao risco baixo, médio e elevado, em combinação com o rendimento, o género e a idade

Environmental Dynamic, Business Strategy, and Financial Performance: an Empirical Study of Indonesian Property and Real Estate Industry

Firm’s strategic orientation involves synchronizing environmental dynamics, corporate strategy and capital structure in order to achieve firm performance targets. The co-alignment model used successfully in the hospitality industry might be used in a wider context as a framework in explaining these relationships simultaneously. Using the data of public firms in Indonesia during the period of 1996-2010, we found that co-alignment model can be implemented in property and real estate industry as well as in hospitality industry

The risk-adjusted performance of alternative investment funds and UCITS : a comparative analysis

This study evaluates the performance of a selection of Alternative Investment Funds (AIFs), and Undertakings for Collective Investment in Transferable Securities Funds (UCITS) which followed a global geographic focus strategy during the period 2010-2016. These two fund structures are governed by different regulatory frameworks, which have evolved and re-shaped over the years. Various yardsticks are employed to evaluate the risk-adjusted performance of the sampled funds, and Monte-Carlo simulations are used to gauge the possible out-of-sample returns. Most of the sampled funds underperformed the benchmark index in terms of their Sharpe and Treynor ratios. Whilst UCITS registered a better overall performance, AIFs outperformed UCITS towards the end of the sample period. This suggests that investors should not assume that one fund structure is inherently superior to the other, since the relative performance may vary over time.peer-reviewe

IT portfolio attributes and investment choices

Many Chief Information Officers (CIOs) and senior executives face the challenge of finding the appropriate IT resource allocation to meet enterprise strategic goals across multi-organizational units. To address this problem, my dissertation opens the black box of enterprise strategic IT resource allocation by examining the prioritization and selection of IT investment choices (i.e., IT initiatives). Since IT Portfolio Management (ITPM) involves making applicable decisions to achieve a firm’s strategic objectives by fine-tuning budgeted costs and returns as business conditions change, my dissertation examines an important class of IS decision problems: IT portfolio attributes and investment choices. My research addresses how a firm can systematically profile numerous IT portfolios and provide theoretical insights into the components of the optimal solution. Based on design science, my specialized method incorporates mathematical optimization and computational experiments and combines real-world data using the Monte Carlo approach to simulate the experimental data. Consequently, by combining the suggested IT portfolio attributes while addressing a variety of ITPM-related issues, the main contribution for my research is a new ITPM-related methodology built on three proposed ITPM models/techniques: (1) optimal efficiency across multi-organizational levels/units simultaneously; (2) the most qualified IT portfolio selection that incorporates decision-makers’ risk tolerance levels; and (3) accurately estimating the current financial standing of each project in a portfolio of IT projects over the project’s full lifecycle. By applying the proposed ITPM-related methodology with illustrative examples, I develop theoretical propositions based on my main findings

The managerial performance of mutual funds: an empirical study

For as long as managed mutual funds have been in existence there has been a desire to accurately assess their relative performance against each other, and also their respective performance in relation to an appropriate stock market index. There has been a specific interest in whether the expensive, professionally managed mutual funds can justify their high cost with respect to low cost, simple index trackers by producing superior, post-cost performance, and this proposition is implicitly tested within this thesis. The aim of this thesis is to undertake an empirical assessment of the managerial performance of mutual funds utilising a three-stage DEA-SFA-DEA methodology which combines linear mathematical programming (DEA) and stochastic frontier analysis (SFA). Specifically, this thesis focuses on evaluating the managerial performance of UK domiciled open-ended investment companies (OEICs) and unit trusts (UTs) over a three year period from 1st January 2008 to 31st December 2010. Various DEA models are utilised including CCR, BCC and SBM DEA models with various orientations, and also versions of these DEA models which make use of the SORM procedure. These are used to carry out an initial evaluation of the managerial performance of the OEICs/UTs, before two of these DEA models are combined with SFA regression analysis in a three-stage DEA-SFA-DEA methodology to purge the influence of environmental factors and statistical noise, thus leading to a more robust evaluation of the true managerial performance of the OEICs/UTs under assessment. The results of this thesis extend support to the premise of the Efficient Market Hypothesis (EMH) that financial markets are information efficient , and thus it is not possible, given the information available when the investment is made, to consistently obtain returns in excess of the average market return on a risk-adjusted basis, and this thesis does so through the use of a novel approach

Portfolio performance across genders and generations : the role of financial innovation

Using a unique dataset on the trading transaction records of private investors from Sweden, we explore the role of gender and age in the use of Exchange Traded Products (ETPs), considered to be innovative investment products, with respect to implications for portfolio performance. We show evidence that investors perform better when trading and investing in mutual funds, but younger investors may be relatively more skillful users of ETPs. We also find that older men and women trade more actively, although they also show a better investment performance, and we emphasize that age and gender are very different demographic determinants of investor behavior and performance.fi=vertaisarvioitu|en=peerReviewed

Subjective Risk Tolerance of South African Investors

In general, the amount of risk an individual is willing to tolerate can be influenced by demographic factors. However, needs for research arise as to whether demographic factors influence the amount of risk investors in South Africa are willing to tolerate. The survey was conducted in 2017 and all South African investors were included in the sample frame. For this study, a sample of 800 was collected and used. Multinomial regression was used to indicate whether there were more than two factors that can influence the four risk tolerance levels of South African investors. The study suggested that gender is a determining factor in the risk tolerance of individuals. African investors were more likely to take the substantial financial risk. Age was also a determining factor of risk tolerance which follows the assumptions of the investor lifecycle where younger investors are more risk tolerant. The study furthermore found that higher annual income attracts more risk-taking while lower-income attracts more risk averseness in individuals. It was lastly observed that married individuals and those that are no longer married will be more likely to be risk-averse. This study makes a significant contribution in profiling investors risk tolerance according to their demographic factors whereby financial institutions can offer more tailored investment options

Impact of ownership structure and ownership concentration on credit risk of Chinese commercial banks

The file attached to this record is the author's final peer reviewed version. The Publisher's final version can be found by following the DOI link.Purpose- The purpose of this study is to examine the effects of bank ownership structure and ownership concentration on credit risk. Design/methodology/approach- Using panel data on a sample of 88 Chinese commercial banks with 1194 observations over a period of 2003-2018, this study employs system generalised method of moments regression to examine the impact of bank ownership structure and ownership concentration on credit risk. Two measures of credit risk, namely, non-performing loan ratio and loan loss provision ratio are used to ensure the robustness of the results. Findings– The results show that ownership type (both government and private ownership) exert positive and significant impact on credit risk. However, our results indicate that concentration of ownership in the hands of government has negative and significant effect on credit risk while private ownership concentration positively impacts on credit risk. Overall our findings suggest that concentration of ownership in government hands reduces risk, whilst private ownership concentration exacerbates credit risks. Our results are invariant to alternative measures of credit risk and financial crisis. Practical implications – The findings provide useful insight to guide policy decisions in Chinese banks’ lending policies and bank ownership. Originality/value– Using hand collected data on ownership structure and governance from annual reports this study deepens our understanding on the effectiveness of Chinese banks’ corporate governance reforms on managing credit risks

The Generalized DEA Model of Fundamental Analysis of Public Firms, with Application to Portfolio Selection

Fundamental analysis is an approach for evaluating a public firm for its investmentworthiness by looking at its business at the basic or fundamental financial level. The focus of this thesis is on utilizing financial statement data and a new generalization of the Data Envelopment Analysis, termed the GDEA model, to determine a relative financial strength (RFS) indicator that represents the underlying business strength of a firm. This approach is based on maximizing a correlation metric between GDEA-based score of financial strength and stock price performance. The correlation maximization problem is a difficult binary nonlinear optimization that requires iterative re-configuration of parameters of financial statements as inputs and outputs. A two-step heuristic algorithm that combines random sampling and local search optimization is developed. Theoretical optimality conditions are also derived for checking solutions of the GDEA model. Statistical tests are developed for validating the utility of the RFS indicator for portfolio selection, and the approach is computationally tested and compared with competing approaches. The GDEA model is also further extended by incorporating Expert Information on input/output selection. In addition to deriving theoretical properties of the model, a new methodology is developed for testing if such exogenous expert knowledge can be significant in obtaining stronger RFS indicators. Finally, the RFS approach under expert information is applied in a Case Study, involving more than 800 firms covering all sectors of the U.S. stock market, to determine optimized RFS indicators for stock selection. Those selected stocks are then used within portfolio optimization models to demonstrate the superiority of the techniques developed in this thesis