Assessing financial risk tolerance of portfolio investors using data envelopment analysis

Parisa Hosseini Ardehali; Joseph C. Paradi; Mette Asmild

doi:10.1142/S0219622005001660

Assessing financial risk tolerance of portfolio investors using data envelopment analysis

Parisa Hosseini Ardehali^*, Joseph C. Paradi, Mette Asmild

^*Corresponding author af dette arbejde

17 Citationer (Scopus)

Abstract

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.

Originalsprog	Engelsk
Tidsskrift	International Journal of Information Technology and Decision Making
Vol/bind	4
Udgave nummer	3
Sider (fra-til)	491-519
Antal sider	29
ISSN	0219-6220
DOI	https://doi.org/10.1142/S0219622005001660
Status	Udgivet - 2005
Udgivet eksternt	Ja

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10.1142/S0219622005001660

Citationsformater

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title = "Assessing financial risk tolerance of portfolio investors using data envelopment analysis",

abstract = "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.",

keywords = "Data envelopment analysis, Financial risk tolerance, Know your client, Risk assessment",

author = "Ardehali, {Parisa Hosseini} and Paradi, {Joseph C.} and Mette Asmild",

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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

SN - 0219-6220

VL - 4

SP - 491

EP - 519

JO - International Journal of Information Technology and Decision Making

JF - International Journal of Information Technology and Decision Making

IS - 3

ER -

Assessing financial risk tolerance of portfolio investors using data envelopment analysis

Abstract

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