Know Your Clients’ Behaviours: A Cluster Analysis of Financial Transactions

Thompson, John R. J.; Feng, Longlong; Reesor, R. Mark; Grace, Chuck

doi:10.3390/jrfm14020050

Cited by 12 publications

(5 citation statements)

References 62 publications

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“…For example, do higherincome individuals tend to exhibit higher elicited risk? Thompson et al (2021). KYC information is collected via a questionnaire when the account is opened and is updated at least yearly, and the financial information is updated each business day to reflect transactions and market value fluctuations.…”

Section: Research Questionsmentioning

confidence: 99%

Measuring the gap between elicited and revealed risk for investors: An empirical study

et al. 2022

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Financial advisors use questionnaires and discussions with clients to determine investment goals, elicit risk preference and tolerance and establish a suitable portfolio allocation for different risk categories. Financial institutions assign risk ratings to their financial products. Advisors use these ratings to categorize products into the same risk categories used for portfolio allocation.Subsequently, clients select a portfolio of assets whose risk profile we call revealed risk. This paper proposes a novel methodology for comparing an individual's elicited and revealed risk. We propose using Value-at-Risk to measure elicited and revealed risk and the discrepancy between them, showing whether clients are over-risked or under-risked. We demonstrate the methodology using a dataset from a Canadian private financial dealer. We find that elicited risk is consistently higher than revealed risk-advisors build a safety buffer into their recommendations-and elicited risk varies with respect to demographic features and trading behaviors in expected ways-investors are receiving sound advice. This risk discrepancy could be used, for example, to gauge the quality of financial advice an individual is receiving, or it could be used to help advisors communicate inconsistencies between client trading actions and client goals. Our methodology falls into the interest realms of advisors, regulators, and dealerships.

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Section: Research Questionsmentioning

confidence: 99%

Measuring the gap between elicited and revealed risk for investors: An empirical study

et al. 2022

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“…On the one hand, an abundance of empirical work from the behavioral finance literature acknowledges a range of additional factors like patience (Breuer et al 2022;Haliassos and Bertaut 1995), self-control problems (Rey-Ares et al 2021;Sekści ńska et al 2021), loss aversion (Gomes 2005;Odean 1999), effort with financial decision making (Gambetti et al 2022;Shapiro and Burchell 2012) and procrastination (Barboza 2018;Gamst-Klaussen et al 2019). Thompson et al (2021) postulate that determinants such as behavioral traits "manifest downstream in trading behavior and, eventually, in portfolio construction and investment outcomes." The latter also relates to an investor's reach for financial advice and the resulting effect on their investment choices Hackethal et al (2021).…”

Section: Introductionmentioning

confidence: 99%

Insights on Crypto Investors from a German Personal Finance Management App

Nemeczek

Weiss

2023

JRFM

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This study investigates the socio-economic characteristics, behavioral preferences, and consumption of individuals who own crypto-assets. Our empirical analysis utilizes data from a German personal finance management app where users connect their bank accounts and depots. We conducted a survey and elicited behavioral factors for financial decision-making. By combining survey with account and security account data, we identify crypto investors’ preferences for financial decision-making and financial advice. Our results suggest that, in particular, students or self-employed, young, and male individuals who are risk-seeking and impatient are more likely to have invested in crypto-assets. Most crypto owners have less experience with financial advisory. They see it as too time-consuming and qualitatively poor, and instead, they prefer to decide on their own as they have self-reported high financial literacy. Investigating their consumption in more detail we conclude that crypto investors more often spend on travelling, electronics, food delivery and investmentsnd less aboutealth Our findings can assist policymakers in identifying high-risk consumers and investors, and help financial institutions develop appropriate products

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“…Behavior in financial transactions is actually an intersection between psychological (including home bias) behavior and financial behavior. Therefore, clustering analysis is urgently needed to see in financial transactions what kind of psychological behavior dominates over financial behavior or vice versa [7].…”

Section: Introductionmentioning

confidence: 99%

Clustering Home Bias Behaviour of Surakarta Traditional Food Lovers in Financial Transaction During Covid-19 Pandemic

Sulistyorini,

Zees,

Widiyati

et al. 2023

Advances in Social Science, Education and Humanities Research

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This research is based on two previous research's result that there was an image changing of Surakarta City from Batik's City toward City of traditional Food. Surakarta's traditional foods are culture in heritage's foods, functional foods, favorite foods have economic potential to rise Surakarta's economy growth, so analysis of clusterinhope of g was needed. Since Covid-19 pandemic, the hope of Surakarta City Government to make traditional food as an investment driver had been constrained. Financial transaction on traditional food is pushed by psychological behavior which is home bias (irrational behavior). While Covid-19 pandemic rational behavior will change to irrational behavior. The question is these changing also happened to traditional food lovers. If the answer is yes, so what should the Surakarta City government do to make their traditional food as an investment driver. The research's result is hoped to give an input for the Surakarta City government, which is home bias profile Surakarta's traditional food in doing financial transaction especially investment during Covid-19 pandemic. Based on this reason, this research is objected to do clustering the home bias profile Surakarta's traditional food in doing financial transaction especially investment during Covid-19 pandemic. In order to obtain the research's objective, the survey has been done by using 100 Surakarta's traditional food lovers as sample of this research. Purposive sampling is used as technique sampling, the all data is analysis using two step clustering method. Interesting finding of this research is there are three clusters of home bias behavior Surakarta's traditional food lovers, when they invest their money on business. Cluster 1 has financial behaviour in business investment, cluster 2 there is changing from financial behavior toward home bias behavior in business investment, and cluster 3 has home bias behavior in business investment. These result can be a policy input for Surakarta City government when they want build city branding based on Surakarta traditional food. It can be started from develop a culture protection by evaluation of effectivity and analyzing networking of development traditional food program for SME. The research's constraint is there having no data about effectivity and networking development program for SME's traditional food. The further research will be based on this research's constraint.

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Know Your Clients’ Behaviours: A Cluster Analysis of Financial Transactions

Cited by 12 publications

References 62 publications

Measuring the gap between elicited and revealed risk for investors: An empirical study

Measuring the gap between elicited and revealed risk for investors: An empirical study

Insights on Crypto Investors from a German Personal Finance Management App

Clustering Home Bias Behaviour of Surakarta Traditional Food Lovers in Financial Transaction During Covid-19 Pandemic

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