Tracking customer risk aversion

Following retail investors' increased accessibility to the financial sector, determining their risk propensity has become important to the industry. This research identifies the correlation between the existing customer risk aversion analysis method and the actual investment result. We use customer investment data and risk propensity survey results of the 370,000 customers of an investment company in South Korea. The results reveal that the two factors are insignificantly correlated. We suggest a new method of identifying actual customer risk aversion using the Xgboost model.

Automated summary

With the increased accessibility of the financial sector to retail investors, determining their risk propensity has become crucial. This research examines the correlation between the existing method of analyzing customer risk aversion and actual investment outcomes. Using investment data and risk propensity survey results from 370,000 customers of a South Korean investment company, the study finds an insignificant correlation between the two factors. A new method employing the Xgboost model is proposed for identifying customers' actual risk aversion.