Analyzing Imputed Financial Data: A New Approach to Cluster Analysis

FRB of Atlanta Working Paper No. 2004-20

23 Pages Posted: 23 Sep 2004  

Ramon P. DeGennaro

University of Tennessee, Knoxville - Department of Finance

Halima Bensmail

University of Tennessee, Knoxville

Date Written: September 2004

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.

Keywords: Dividend reinvestment, Bayesian analysis, Gibbs sampler, clustering

JEL Classification: G20, G29, G35

Suggested Citation

DeGennaro, Ramon P. and Bensmail, Halima, Analyzing Imputed Financial Data: A New Approach to Cluster Analysis (September 2004). FRB of Atlanta Working Paper No. 2004-20. Available at SSRN: https://ssrn.com/abstract=594383 or http://dx.doi.org/10.2139/ssrn.594383

Ramon P. DeGennaro (Contact Author)

University of Tennessee, Knoxville - Department of Finance ( email )

423 Stokely Management Center
Knoxville, TN 37996
United States
865-974-1726 (Phone)
865-974-1716 (Fax)

Halima Bensmail

University of Tennessee, Knoxville ( email )

Knoxville, TN 37996
United States

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