Bora Aktan

A comparison of data mining techniques for credit scoring in banking: A managerial perspective

Credit scoring is a very important task for lenders to evaluate the loan applications they receive from consumers as well as for insurance companies, which use scoring systems today to evaluate new policyholders and the risks these prospective customers might present to the insurer. Credit scoring systems are used to model the potential risk of loan applications, which have the advantage of being able to handle a large volume of credit applications quickly with minimal labour, thus reducing operating costs, and they may be an effective substitute for the use of judgment among inexperienced loan officers, thus helping to control bad debt losses. This study explores the performance of credit scoring models using traditional and artificial intelligence approaches: discriminant analysis, logistic regression, neural networks and classification and regression trees. Experimental studies using real world data sets have demonstrated that the classification and regression trees and neural networks outperform the traditional credit scoring models in terms of predictive accuracy and type II errors.

Efficiency and risk in commercial banking: empirical evidence from East Asian countries

This paper analyses the effects of off-balance sheet (OBS) activities and various types of risks on the cost and profit efficiencies of banks in seven East Asian countries between 2001 and 2008. Cost and profit efficiency scores are estimated using the data envelopment analysis approach. The results of this analysis are then used to identify the impact of OBS activities and risk exposures on cost and profit efficiencies using a Tobit regression. Bank insolvency risk (as measured by z-scores) is positively related to profit efficiency, while interest sensitivity, size, equity to total assets and OBS exposures all impact on cost efficiency. The analysis of the impact of input and output slacks illustrates that in around 1 in 5 cases banks’ cost efficiency can be improved by adjusting the former variables, whereas in only around 1 in 100 cases a similar outcome is possible for profit efficiency.

Islamic banking: a study of customer satisfaction and preferences in non-Islamic countries

The analysis of their responses revealed a certain degree of satisfaction of many of the Islamic banks facilities and products. The respondents expressed their dissatisfaction with some of the Islamic banks services. Although the respondents indicated that they are aware of a number of specific Islamic financial products like Murabaha, Musharaka and Mudaraba, they show that they do not deal with them.

The investment decision-making process from a risk manager's perspective: a survey

Purpose - The purpose of this paper is to identify associations between various inputs in the investment decision process of Saudi Arabian risk managers (RMs). Design/methodology/approach - The paper reports the views of 81 RMs in Saudi Arabia regarding their approach to investment risk and uses these as inputs into conditional independence graphs. Findings - Saudi RMs favour their experience and personal judgment over mathematical projections and statistical models when considering investment risk. A need remains for an efficient risk-modeling framework for the banking system that has more practical value than those which have emerged to date. Originality/value - The paper provides novel insights on issues such as the extent to which risk management is dealt with in practice via personal experience rather than statistical-based projections. The findings also shed light on the level of satisfaction amongst RMs and regulators with the incentives provided in the Saudi Arabian environment, and the importance placed on guidance from the nations leading regulatory institution.

OFF-BALANCE SHEET ACTIVITIES IMPACT ON COMMERCIAL BANKS PERFORMANCE: AN EMERGING MARKET PERSPECTIVE

Abstract This paper examines the effect of off-balance sheet (OBS) activities on performance of the banks listed on Istanbul Stock Exchange (ISE). We use four measures of performance including bank’s risk exposures, profitability, leverage, and liquidity position. We find that both bank-specific risk and foreign exchange rate risk are positively related with OBS activities. This indicates that OBS activities increase bank-specific and foreign exchange risk exposures of the banks in Turkey. The positive relationship might serve as a warning to bank’s speculative action using OBS transactions in the market. The results also indicate that OBS activities, due to its hedging perception, improve bank’s stock returns but have a negative impact on return on equity. In addition, OBS activities do not have a statistically significant impact on leverage or liquidity.

Co-movements of REIT indices with structural changes before and during the subprime mortgage crisis: evidence from Euro-Med markets

This paper examines the long-run relationships between the REIT indices of the UK, Turkey and Israel in the Euro-Med zone with that of MSCI US REIT Index by using weekly data over the period 2003Q3 through 2009Q3, which includes the latest US subprime mortgage crisis and its effects on global stock markets. Although our EG test results do not indicate a long-run relationship, after taking account of the structural changes by applying the GH test, we find a long-run interaction between the REIT indices of UK and Israel with that of the US. However, our results indicate the lack of co-movement between REIT index of Turkey with the US. In addition, our dynamic OLS test results indicate a perfect relationship between the UK and the US indices. Our findings show that international investors who make long-term investments can only gain from diversifying into the real estate market of Turkey among the involved markets in the Euro-Med zone.

Development and future prospects of Islamic banking in Bangladesh

The objective of this research is to provide a brief analysis of the performance of Islamic banks in Bangladesh. The Islamic banks in Bangladesh continued to show strong growth since its inception in 1983 to June 2007, Islamic banks maintained and achieved strong position in the key areas like capital adequacy, liquidity, assets quality, management and earnings. The research is based on primary data, which has been collected by giving out a questionnaire to the employees of four selected banks at random basis. A sample of 200 respondents took part in this study.

Extreme Movements and Measuring Risk in WTI Oil Prices

We investigate the performance of Value at Risk (VaR) models at measuring risk for WTI oil one-month futures returns. VaR models are used to calculate commodity market risk at extreme quantiles: 0.95, 0.99, 0.995 and 0.999 for both long and short trading positions. Widespread VaR models do not provide adequate risk coverage and their performance is especially weak for short position in oil. Conditional and unconditional extreme value theory VaR models are found to be the only ones correctly forecasting the true level of upside and downside risk. We also investigate the closeness of fit of theoretical distributions to the extreme tails of oil returns. Results show that generalised Pareto distribution provides the best fit to both tails of oil returns although tails differ significantly, with the right tail having a higher tail index, indicative of more extreme events.

Linkage between company scores and stock returns

Previous studies on company scores conducted at firm-level, generally concluded that there exists a positive relation between company scores and stock returns. Motivated by these studies, this study examines the relationship between company scores (Corporate Governance Score, Economic Score, Environmental Score, and Social Score) and stock returns, both at portfoliolevel analysis and firm-level cross-sectional regressions. In portfolio-level analysis, stocks are sorted based on each company scores and quintile portfolio are formed with different levels of company scores. Then, existence and significance of raw returns and risk-adjusted returns difference between portfolios with the extreme company scores (portfolio 10 and portfolio 1) is tested. In addition, firm-level cross-sectional regression is performed to examine the significance of company scores effects with control variables. While portfolio-level analysis results indicate that there is no significant relation between company scores and stock returns; firm-level analysis indicates that economic, environmental, and social scores have effect on stock returns, Received: June, 2017 1st Revision: September, 2017 Accepted: October, 2017 DOI: 10.14254/20718330.2017/10-4/17 Journal of International Studies S ci en ti fi c P a pe rs

Is Improving the Worth of Human Capital a Key Strategy for Bahrain? Empirical Evidence

The aim of this paper is to develop a macroeconometric model for emerging economies as in the case of Bahrain (the most open economy in GCC region) to measure the impact of human capital investment on key macroeconomic indicators (1990 through 2016). The paper also makes an attempt to forecast the effects of changes in government spending on education as a percentage of GDP on the country’s key macroeconomic variables through simulation under 3 different scenarios for the next five years. The main findings point out that an increase in government spending on education over time has a positive influence on human capital in terms of increased employment along with positive effect on output, private investments and consumption whilst contributing to lower inflation rate.