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Analyzing imputed financial data: a new approach to cluster analysis

Author

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  • Halima Bensmail
  • Ramon P. DeGennaro

Abstract

The authors introduce a novel statistical modeling technique to cluster analysis and apply it to financial data. Their two main goals are to handle missing data and to find homogeneous groups within the data. Their approach is flexible and handles large and complex data structures with missing observations and with quantitative and qualitative measurements. The authors achieve this result by mapping the data to a new structure that is free of distributional assumptions in choosing homogeneous groups of observations. Their new method also provides insight into the number of different categories needed for classifying the data. The authors use this approach to partition a matched sample of stocks. One group offers dividend reinvestment plans, and the other does not. Their method partitions this sample with almost 97 percent accuracy even when using only easily available financial variables. One interpretation of their result is that the misclassified companies are the best candidates either to adopt a dividend reinvestment plan (if they have none) or to abandon one (if they currently offer one). The authors offer other suggestions for applications in the field of finance.

Suggested Citation

  • Halima Bensmail & Ramon P. DeGennaro, 2004. "Analyzing imputed financial data: a new approach to cluster analysis," FRB Atlanta Working Paper 2004-20, Federal Reserve Bank of Atlanta.
    • Handle: RePEc:fip:fedawp:2004-20
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    File URL: https://www.frbatlanta.org/-/media/documents/research/publications/wp/2004/wp0420.pdf
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    References listed on IDEAS

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    7. Dahlstedt, Roy & Salmi, Timo & Luoma, Martti & Laakkonen, Arto, 1994. "On the usefulness of standard industrial classifications in comparative financial statement analysis," European Journal of Operational Research, Elsevier, vol. 79(2), pages 230-238, December.
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    Cited by:

    1. Fan Cai & Nhien-An Le-Khac & Tahar Kechadi, 2016. "Clustering Approaches for Financial Data Analysis: a Survey," Papers 1609.08520, arXiv.org.

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