Have you ever been "risk-profiled" by your bank? By answering a battery of questions about your income, your lifestyle, your borrowing, the banks calculate your risk profile. But the new European regulations (dubbed Mifid2) require banks to go further by measuring the appetite or risk aversion of their customers. A more difficult dimension to identify. How do banks do it?
Bertrand Munier is Professor Emeritus of Economics at the Sorbonne, and the author of numerous books on decision-making in the face of risk: "banks calculate only one type of risk: the objective risk. They study simple criteria such as income, spending needs, financial commitments in the future… And they conclude the amount of euros they can let their customers invest by making them take reasonable risks. But there is another dimension in the risk that the banks do not measure is the subjective risk. What we have experienced in our past influences our economic decisions today and tomorrow. "To understand the financial profile of an individual, one must cross the two types of risk: objective and subjective" adds the specialist.
The financial risk is therefore not just a rational question and figures. "We know that there are no economic decisions without emotional dimension" adds Luc Meunier, lecturer at the Grenoble School of business and PhD student in Neurofinance. This branch of behavioral finance is a specialty in full development in France and may well become the "French touch" of the economy. Luc Meunier explains: "depending on how you measure risk tolerance, depending on when you are measuring, two months away you can have very different results. Evaluating the risk profile of an individual is very complex. "
Both researchers are drafting innovative solutions. In London, Bertrand Munier developed in the city, a computer software called "NERP: new era risk Profiler". In a dozen questions, this software measures the risk profile of an individual by taking into account both objective data (income, debts, lifestyle…) and subjective (appetite or psychological aversion to risk). The first 100 tests proved conclusive.
For his part, the young researcher Luc Meunier seeks to know whether the taste of risk is a trait of personality or whether it results from financial incentives. "The basic premise in finance is the following" says the researcher: "without incentive, individuals do not take risks. For example, with a fixed salary, a person has an interest in taking as little risk as possible. So that the individual agrees to take risks, does he have to give him bonuses, stock options, stocks? We are trying to find out whether it is the nature of the employment contract or rather the personal characteristics of the individual who determines the risk taking? »
The PhD student in Grenoble goes further: "we measure on the one hand the personality through a questionnaire but we also measure the level of testosterone of the person by salivary levy. The next study in April will offer candidates different contracts with different levels of remuneration. The "guinea pigs" will spit in a pipette to be analyzed in the laboratory to measure their level of testosterone. "Studies in recent years have shown that there is a link between testosterone levels and financial risk taking. What is not known is whether the type of contract influences more or less than the personal characteristics, such as testosterone, concludes Luc Meunier. See you next September to count the results.