Assessing financial risk tolerance of portfolio investors using data envelopment analysis
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Assessing financial risk tolerance of portfolio investors using data envelopment analysis. / Ardehali, Parisa Hosseini; Paradi, Joseph C.; Asmild, Mette.
In: International Journal of Information Technology and Decision Making, Vol. 4, No. 3, 2005, p. 491-519.Research output: Contribution to journal › Journal article › Research › peer-review
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TY - JOUR
T1 - Assessing financial risk tolerance of portfolio investors using data envelopment analysis
AU - Ardehali, Parisa Hosseini
AU - Paradi, Joseph C.
AU - Asmild, Mette
PY - 2005
Y1 - 2005
N2 - For some investors their own personal investment counsellors address their investment strategy; for others automated means are used. To protect investors, the Canadian Government has enacted the "Know Your Client" Act requiring that all investment dealers and vendors of securities must know their clients and advise them on the appropriate investment strategy. This paper uses Data Envelopment Analysis (DBA) in a novel manner by applying it to a large data set of answers to a number of psychological questions. A Slacks Based Model was used to estimate investor risk tolerance. The model analyses the risk profile of the investor and can be used as a guide to match the risk rating of the investment vehicles for the client. Statistical comparisons were also carried out to show how risk tolerance relates to various demographic variables. Finally, the DEA results were validated through comparisons with the commercial system already in use.
AB - For some investors their own personal investment counsellors address their investment strategy; for others automated means are used. To protect investors, the Canadian Government has enacted the "Know Your Client" Act requiring that all investment dealers and vendors of securities must know their clients and advise them on the appropriate investment strategy. This paper uses Data Envelopment Analysis (DBA) in a novel manner by applying it to a large data set of answers to a number of psychological questions. A Slacks Based Model was used to estimate investor risk tolerance. The model analyses the risk profile of the investor and can be used as a guide to match the risk rating of the investment vehicles for the client. Statistical comparisons were also carried out to show how risk tolerance relates to various demographic variables. Finally, the DEA results were validated through comparisons with the commercial system already in use.
KW - Data envelopment analysis
KW - Financial risk tolerance
KW - Know your client
KW - Risk assessment
U2 - 10.1142/S0219622005001660
DO - 10.1142/S0219622005001660
M3 - Journal article
AN - SCOPUS:33746185618
VL - 4
SP - 491
EP - 519
JO - International Journal of Information Technology and Decision Making
JF - International Journal of Information Technology and Decision Making
SN - 0219-6220
IS - 3
ER -
ID: 227788196