IDEAS home Printed from https://ideas.repec.org/a/pal/jmarka/v12y2024i4d10.1057_s41270-023-00263-1.html
   My bibliography  Save this article

Mapping borrowers’ and lenders’ interactions according to their dark financial profiles

Author

Listed:
  • Olivier Mesly

    (ICN ARTEM)

  • Hareesh Mavoori

    (ICN ARTEM)

Abstract

In this interdisciplinary, conceptual article with implications in marketing financial products and services, we study real estate and capital markets characterized by a predatory paradigm and economic agents’ dark financial profiles (DFPs). These are estimated by three orthogonal components—disconnection, irrationality, and deceit. We identify the best interactional patterns of borrower-lender profiles, ones that expectedly minimize the risk of default. We resort to discretized, predator–prey Lotka–Volterra equations where lenders act as predators and borrowers as prey, incorporating market trends and learning effects. To mathematically operationalize our framework, we use combinatorics with high, medium, and low levels of the three components of DFPs. We find 27 salient lender-borrower interactional scenarios and observe three different patterns: explosive, conducive, and implosive. Our theoretical findings indicate that equal (ir)rationality (in financial terms) between lenders and borrowers is a necessary but insufficient condition to maintain harmonious, long-term relationships. We use eutectic theory to map the agents’ profiles by introducing another variable: Expected return [E(Rp)] versus risk [σ], using the Capital Asset Pricing Model (CAPM) as a base. We find six market segments: the inactive predators and prey, the loose, the greedy, the vulnerable, and the stable. We identify the optimal combination of borrowers–lenders interaction under risk, given market trends and learning effects. We propose a path for future research that would see the application of analytical tools such as factor analysis, k-means clustering algorithm, χ2 and non-parametric Kruskal–Wallis and Dunn’s multiple comparison tests to verify differences among the hypothesized segments.

Suggested Citation

  • Olivier Mesly & Hareesh Mavoori, 2024. "Mapping borrowers’ and lenders’ interactions according to their dark financial profiles," Journal of Marketing Analytics, Palgrave Macmillan, vol. 12(4), pages 1090-1104, December.
  • Handle: RePEc:pal:jmarka:v:12:y:2024:i:4:d:10.1057_s41270-023-00263-1
    DOI: 10.1057/s41270-023-00263-1
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41270-023-00263-1
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    File URL: https://libkey.io/10.1057/s41270-023-00263-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Bossaerts, Peter & Suzuki, Shinsuke & O’Doherty, John P., 2019. "Perception of intentionality in investor attitudes towards financial risks," Journal of Behavioral and Experimental Finance, Elsevier, vol. 23(C), pages 189-197.
    2. D. Colander & H. Follmer & A. Haas & M. Goldberg & K. Juselius & A. Kirman & T. Lux & B. Sloth, 2010. "The Financial Crisis and the Systemic Failure of Academic Economics," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 6.
    3. Tim Jones & G. Stacy Sirmans, 2019. "Understanding Subprime Mortgage Default," Journal of Real Estate Literature, Taylor & Francis Journals, vol. 27(1), pages 27-52, August.
    4. Bertrand, Jérémie & Weill, Laurent, 2021. "Do algorithms discriminate against African Americans in lending?," Economic Modelling, Elsevier, vol. 104(C).
    5. Matteo Iacoviello, 2008. "Household Debt and Income Inequality, 1963-2003," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(5), pages 929-965, August.
    6. Timothy C. Salmon, 2001. "An Evaluation of Econometric Models of Adaptive Learning," Econometrica, Econometric Society, vol. 69(6), pages 1597-1628, November.
    7. Veld, Chris & Veld-Merkoulova, Yulia V., 2008. "The risk perceptions of individual investors," Journal of Economic Psychology, Elsevier, vol. 29(2), pages 226-252, April.
    8. Jim F. Couch, Mark D. Foster, Keith Malone, and David L. Black, 2011. "An Analysis of the Financial Services Bailout Vote," Cato Journal, Cato Journal, Cato Institute, vol. 31(1), pages 119-128, Winter.
    9. Ghazi A. Al-Weshah, 2017. "Marketing intelligence and customer relationships: empirical evidence from Jordanian banks," Journal of Marketing Analytics, Palgrave Macmillan, vol. 5(3), pages 141-152, December.
    10. Monika Lisjak & Angela Y. Lee, 2014. "The Bright Side of Impulse: Depletion Heightens Self-Protective Behavior in the Face of Danger," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 41(1), pages 55-70.
    11. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    12. Roy, Saktinil & Kemme, David M., 2012. "Causes of banking crises: Deregulation, credit booms and asset bubbles, then and now," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 270-294.
    13. Huang, Yan & Kou, Gang & Peng, Yi, 2017. "Nonlinear manifold learning for early warnings in financial markets," European Journal of Operational Research, Elsevier, vol. 258(2), pages 692-702.
    14. Olivier Mesly & Nicolas Huck, 2023. "Financial Market Paradigm Shifts and Consumer Financial Spinning," Post-Print hal-04464974, HAL.
    15. Bryan Bollinger & Song Yao, 2018. "Risk transfer versus cost reduction on two-sided microfinance platforms," Quantitative Marketing and Economics (QME), Springer, vol. 16(3), pages 251-287, September.
    16. Malcolm Baker & Jeffrey Wurgler, 2007. "Investor Sentiment in the Stock Market," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 129-152, Spring.
    17. Olivier Mesly & Maria Petrescu & Alexandra Mesly, 2022. "Terminology Matters: A Review on the Concept of Economic Predation," Journal of Economic Issues, Taylor & Francis Journals, vol. 56(4), pages 959-987, October.
    18. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    19. Del Negro, Marco & Otrok, Christopher, 2007. "99 Luftballons: Monetary policy and the house price boom across U.S. states," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1962-1985, October.
    20. Eduardo B. Andrade & Teck-Hua Ho, 2009. "Gaming Emotions in Social Interactions," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 36(4), pages 539-552, December.
    21. Bas Verplanken & Ayana Sato, 2011. "The Psychology of Impulse Buying: An Integrative Self-Regulation Approach," Journal of Consumer Policy, Springer, vol. 34(2), pages 197-210, June.
    22. Olivier Mesly & Nicolas Huck, 2023. "Financial Market Paradigm Shifts and Consumer Financial Spinning," Journal of Economic Issues, Taylor & Francis Journals, vol. 57(4), pages 1062-1078, October.
    23. Fenghua Song & AnjanV. Thakor, 2010. "Financial System Architecture and the Co-evolution of Banks and Capital Markets," Economic Journal, Royal Economic Society, vol. 120(547), pages 1021-1055, September.
    24. James W. Peltier & Andrew J. Dahl & John E. Schibrowsky, 2016. "Sequential loss of self-control: Exploring the antecedents and consequences of student credit card debt," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 21(3), pages 167-181, September.
    25. Wijeratne, A.W. & Yi, Fengqi & Wei, Junjie, 2009. "Bifurcation analysis in the diffusive Lotka–Volterra system: An application to market economy," Chaos, Solitons & Fractals, Elsevier, vol. 40(2), pages 902-911.
    26. Olivier Mesly & Maria Petrescu & Alexandra Mesly, 2022. "Terminology Matters: A Review on the Concept of Economic Predation," Post-Print hal-04318292, HAL.
    27. Igor Dubina & Elias Carayannis & David Campbell, 2012. "Creativity Economy and a Crisis of the Economy? Coevolution of Knowledge, Innovation, and Creativity, and of the Knowledge Economy and Knowledge Society," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 3(1), pages 1-24, March.
    28. Timothy Jones & G. Stacy Sirmans, 2015. "The Underlying Determinants of Residential Mortgage Default," Journal of Real Estate Literature, Taylor & Francis Journals, vol. 23(2), pages 167-205, January.
    29. Ralph B. Siebert & Michael J. Seiler, 2022. "Why Do Buyers Pay Different Prices for Comparable Products? A Structural Approach on the Housing Market," The Journal of Real Estate Finance and Economics, Springer, vol. 65(2), pages 261-292, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Olivier Mesly & Hareesh Mavoori & Nicolas Huck, 2023. "The Role of Financial Spinning, Learning, and Predation in Market Failure," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(1), pages 517-543, March.
    2. Mesly, Olivier & Chkir, Imed & Racicot, François-Éric, 2019. "Predatory cells and puzzling financial crises: Are toxic products good for the financial markets?," Economic Modelling, Elsevier, vol. 78(C), pages 11-31.
    3. Keunbae Ahn, 2021. "Predictable Fluctuations in the Cross-Section and Time-Series of Asset Prices," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 1-2021, January-A.
    4. Shiyang Huang & Xin Liu & Dong Lou & Christopher Polk, 2024. "The Booms and Busts of Beta Arbitrage," Management Science, INFORMS, vol. 70(8), pages 5367-5385, August.
    5. Ramiah, Vikash & Xu, Xiaoming & Moosa, Imad A., 2015. "Neoclassical finance, behavioral finance and noise traders: A review and assessment of the literature," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 89-100.
    6. Nizar Raissi & Sahbi Missaoui, 2015. "Role of investor sentiment in financial markets: an explanation by behavioural finance approach," International Journal of Accounting and Finance, Inderscience Enterprises Ltd, vol. 5(4), pages 362-401.
    7. Olivier Mesly & David W. Shanafelt & Nicolas Huck, 2021. "Dysfunctional Markets: A Spray of Prey Perspective," Journal of Economic Issues, Taylor & Francis Journals, vol. 55(3), pages 797-819, July.
    8. Yonatan Berman & Yoash Shapira & Eshel Ben-Jacob, 2014. "Unraveling Hidden Order in the Dynamics of Developed and Emerging Markets," PLOS ONE, Public Library of Science, vol. 9(11), pages 1-10, November.
    9. Sayim, Mustafa & Rahman, Hamid, 2015. "An examination of U.S. institutional and individual investor sentiment effect on the Turkish stock market," Global Finance Journal, Elsevier, vol. 26(C), pages 1-17.
    10. Didier SORNETTE, 2014. "Physics and Financial Economics (1776-2014): Puzzles, Ising and Agent-Based Models," Swiss Finance Institute Research Paper Series 14-25, Swiss Finance Institute.
    11. Prajwal Eachempati & Praveen Ranjan Srivastava, 2021. "Accounting for unadjusted news sentiment for asset pricing," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 13(3), pages 383-422, May.
    12. Olivier Mesly, 2021. "Buy Now and Pay (Dearly) Later: Unraveling Consumer Financial Spinning," IJFS, MDPI, vol. 9(4), pages 1-21, September.
    13. Nguyen, Hung T. & Pham, Mia Hang, 2021. "Air pollution and behavioral biases: Evidence from stock market anomalies," Journal of Behavioral and Experimental Finance, Elsevier, vol. 29(C).
    14. Committee, Nobel Prize, 2013. "Understanding Asset Prices," Nobel Prize in Economics documents 2013-1, Nobel Prize Committee.
    15. Rilwan Sakariyahu & Mohamed Sherif & Audrey Paterson & Eleni Chatzivgeri, 2021. "Sentiment‐Apt investors and UK sector returns," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 3321-3351, July.
    16. Sakariyahu, Rilwan & Johan, Sofia & Lawal, Rodiat & Paterson, Audrey & Chatzivgeri, Eleni, 2023. "Dynamic connectedness between investors’ sentiment and asset prices: A comparison between major markets in Europe and USA," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 89(C).
    17. Semen Son-Turan, 2016. "The Impact of Investor Sentiment on the "Leverage Effect"," International Econometric Review (IER), Econometric Research Association, vol. 8(1), pages 4-18, April.
    18. Pereira Reichhardt, Joaquín & Iqbal, Tabassum, 2014. "Investment Decisions: Are we fully-Rational?," MPRA Paper 57686, University Library of Munich, Germany.
    19. Radeef Chundakkadan, 2021. "Light a lamp and look at the stock market," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-21, December.
    20. Shi, Huai-Long & Zhou, Wei-Xing, 2022. "Factor volatility spillover and its implications on factor premia," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).

    More about this item

    Keywords

    Borrowers; Combinatorics; Dark financial profile; Deceit; Disconnection; Eutectic; Irrationality; Learning; Lenders;
    All these keywords.

    JEL classification:

    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:jmarka:v:12:y:2024:i:4:d:10.1057_s41270-023-00263-1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.