Debt Securities Research Articles

Rynek papierów dłużnych emitowanych przez przedsiębiorstwa niefinansowe w Polsce na tle rynków w wybranych krajach UE

Przedmiot badań: Przedmiotem badań jest rynek papierów dłużnych emitowanych przez przedsiębiorstwa niefinansowe w Polsce, Francji, Włoszech, Czechach, Słowacji i na Węgrzech.
 Cel badawczy: Celem pracy jest ocena rozwoju rynku papierów dłużnych emitowanych przez przedsiębiorstwa niefinansowe w Polsce na tle rynków w wybranych krajach UE. Podstawowa teza pracy brzmi – rynek papierów dłużnych emitowanych przez przedsiębiorstwa niefinansowe w Polsce jest rynkiem słabo rozwiniętym.
 Metoda badawcza: Praca opiera się na analizie danych statystycznych obrazujących rozwój rynku papierów dłużnych emitowanych przez przedsiębiorstwa niefinansowe w Polsce i wybranych krajach UE. Podstawowym źródłem danych były statystyki w zakresie instrumentów dłużnych prezentowane przez Bank Rozrachunków Międzynarodowych. W analizie skupiono się na wielkości i dynamice zmian zadłużenia z tytułu papierów dłużnych emitowanych przez przedsiębiorstwa niefinansowe w okresie 2010–2019 oraz dynamice zmian wielkości emisji zagranicznych. Dodatkowo, w celu przeprowadzenia analizy porównawczej stopnia rozwoju rynku papierów dłużnych emitowanych przez przedsiębiorstwa niefinansowe w omawianych krajach, odniesiono wartość zadłużenia z tytułu papierów dłużnych emitowanych przez przedsiębiorstwa niefinansowe do PKB w poszczególnych krajach, wyliczając wskaźnik zadłużenia do PKB.
 Wyniki: Analiza rynku papierów dłużnych emitowanych przez przedsiębiorstwa niefinansowe w Polsce na tle rynków papierów dłużnych emitowanych przez przedsiębiorstwa niefinansowe w Hiszpanii, Francji, Włoszech, Słowacji, Czechach i na Węgrzech pozwala stwierdzić, iż poziom rozwoju tego rynku w Polsce odbiega od poziomu rozwoju rynku francuskiego, hiszpańskiego, włoskiego czy też czeskiego. Stopień rozwoju rynku w Polsce można porównać do stopnia rozwoju rynku słowackiego. Przeprowadzona analiza pozwala dodatkowo stwierdzić, że przedsiębiorstwa niefinansowe w Polsce nie są zainteresowane dokonywaniem emisji papierów dłużnych na rynki zagraniczne.

Exchange trade current state and development trends

The article is devoted to the investigation of the state and development trends of exchange trading at the current stage. The main aspects characterizing the stock and commodity stock markets in our country and the world have been analyzed. The authors emphasized the concentration of exchange trading in Ukraine on several licensed exchanges, which resulted in a significant increase in the regulated market. The main groups of goods that prevail on the commodity and stock markets of Ukraine are singled out. It was established that the predominant share of trading volume of financial instruments, which was carried out by operators of organized capital markets in Ukraine in 2021, fell on debt securities, and the total trading volume of shares was insignificant. Emphasis is placed on the determining influence of globalization processes on the exchange market development. It is noted that the financial market occupies a dominant place with a share of about 80% of the total exchange turnover in the total world stock exchange trade. Significant revitalization and development of electronic stock trading and constant improvement of stock trading technologies on an innovative basis have been noted. The paper provides an assessment of the current state of development of international exchange trading. An increase in market capitalization, a trend toward growth in the number of concluded contracts in general and for certain types of exchange contracts on commodity and stock exchanges have been noted. The main factors affecting the current state of stock trading development in the world have been systematized. They include market globalization, the development of the latest information technologies, the strengthening of the influence of global financial market participants, the diversification of existing and the emergence of new financial instruments, the unification of regulations for the stock markets, regional structural changes in the activity of the world stock market with increased concentration of stock trading in the Asia-Pacific region.

ПОКАЗАТЕЛИ, ВЛИЯЮЩИЕ НА ФОНДОВЫЙ РЫНОК В РОССИИ, И РЕГУЛИРОВАНИЕ ЕГО РАЗВИТИЯ

The need to establish factors and indicators immediately affecting the Russian stock market is caused by the fact that the stock market has a significant impact on the economic development of the state. The paper focuses on the factors and indicators that can affect the domestic stock market development. The author used correlation and regression analysis to assess the impact on the stock market development in Russia of such indicators as the number of credit institutions, the number of citizens who opened brokerage accounts at the Moscow Stock Exchange, the number of financial pyramids. To exclude speculative transactions, usually involving shares and negatively affecting the development of the securities market, the volume of debt securities issuance was chosen as an indicator characterizing the stock market development. It is proved that the most significant indicator affecting the activity of issuers in Russia when issuing debt securities is the investment activity of citizens at the Moscow Stock Exchange (the number of brokerage accounts opened annually). The author gives recommendations on the securities market development and regulation in Russia, including the need to expand tax benefits (in addition to the benefits extended to individual investment accounts) for transactions of individuals with securities at the organized stock exchanges; it is recommended to continue the systematic work of authorities and other institutions to improve the financial literacy of the population. The concept of a financial supermarket has been developed based on the use of financial engineering and technological and informational infrastructure of the Gosuslugi.ru website. According to it, investors determine the parameters for issuing securities, while issuers retain the right to choose from the proposed options.

ДОЛГОВАЯ ЭКОНОМИКА США

The article examines the US budget policy, reveals the reasons for the growth of public debt. It is emphasized that, despite the annual persistence of the budget imbalance and the ever-growing public debt, the US economy is gradually emerging from the crisis caused by COVID19. The impossibility of a default in the United States with a very significant public debt can be explained by the peculiarity of the effective mechanism of the US Federal Reserve for the implementation of monetary policy. The financial regulator can issue dollars at any time by buying government bonds. In other words, the United States has the ability to borrow money and repay it in the national currency. The US economic policy is increasingly influenced by the Fed by changing the volume of the money supply through transactions with Treasury bonds. In recent years, there has been a weakening of interest on the part of foreign investors in the acquisition of US debt securities. The presence on the US debt market of such leading financial players as China, OPEC countries, Russia has decreased. This is largely due to geopolitical factors, the situation on the world oil market, and fluctuations in national exchange rates. It is concluded that the influence of the Fed on the economic processes taking place in the current conditions of the development of the world economy is growing.

АНАЛІЗ ДІЯЛЬНОСТІ СУБ’ЄКТІВ РИНКУ ОБЛІГАЦІЙ ВНУТРІШНЬОЇ ДЕРЖАВНОЇ ПОЗИКИ УКРАЇНИ

Debt securities, namely domestic government bonds have become the most in demand after of all securities on the market in recent years. The current state of the government bond market requires systematic research and analysis given the role of these financial instruments in the debt and investment policy of the state as well as the identification and delineation of the main characteristics of the domestic market of domestic government bonds. The aim of the work is to study the dynamics of the domestic market of domestic government bonds, their profitability, the structure of market participants, the characteristics of their investment activities as well as to determine the prospects for development of this segment of the securities market in modern conditions. In order to achieve this goal, the following tasks were outlined: to identify the subjects of the domestic government bond market of Ukraine; outline the key problems facing the domestic securities market; to present proposals and recommendations for solving or at least localizing the problems that arise in the securities market of Ukraine. The article identifies the main subject in the market of domestic government bonds in Ukraine and explores their activities during 2017–2021. During this period in the unstable political and economic situation in the country was observed a constant growth in sales of government debt securities. The reasons that led to significant changes in the activity of investors operating in this market have also been identified. The article analyzes the activities of individual participants in the government bond market establishes the structure of their market share, outlines the reasons that contribute to the growth of their activity in the market or vice versa – encourage its folding. The volume of the portfolio in securities of Ukrainian banks and their share in total assets is determined. An analysis of the weighted average profitability on government bonds placed in national and foreign currencies. The characteristic features of the domestic market of government bonds and the main reasons hindering its further development are highlighted.

Significant Insights, Value Orientation and Differences Between the Mutual Fund Investment Flow and Indian Stock Market Returns – A Theoretical Assimilation

Researchers and academicians from all over the world have become interested in the study of the causal relationship between mutual fund investment flow and stock market returns in recent years. But there is currently a contradictory body of empirical data on this matter. Additionally, there are a few studies that take the case of India into account. In order to better understand the dynamics of the relationship between mutual fund investment flow and stock market returns in India from January 2000 to May 2010, the following article will do just that. The Granger causality tests are applied using the Toda and Yamamoto approach, which yields evidence of a one-way causal relationship between stock market returns and mutual fund investment flow. This suggests that the expansion of stock market activity in India draws mutual funds to the stock market. Therefore, the government and monetary authorities should take the necessary actions to reduce the volatility and increase the efficiency of the capital market. By gathering money from households and investing it in the stock and debt markets, mutual funds enable portfolio diversification and relative risk aversion. In India, a specific type of mutual fund called fixed-income funds invests in debt securities that have been issued by businesses, banks, or the government. In India, fixed-income funds are also referred to as debt funds and income funds. The goal of the current study is to assess the performance of a few selected debt or income mutual fund schemes in India based on their daily NAV using various statistical measures. In the past ten years, income schemes have become more and more popular. The securities that were purchased are referred to as the fund's portfolio. There may have been restrictions on rival products, which led to the emergence of money market and (short-term) bond funds. In this study, the performance of several mutual fund types in India was compared and studied. The results showed that equities funds outperformed income funds. The study also found that institutional fund managers can time their investments and that equity fund managers have significant market timing ability, but broker operated funds did not demonstrate this ability. Additionally, empirical research has shown that fund managers possess significant timing ability and can time their investments to match market conditions.

Equity and Debt Securities

Equity and Debt Securities

The Market for Short-Term Debt Securities in Europe: What We Know and What We Do Not Know

The Market for Short-Term Debt Securities in Europe: What We Know and What We Do Not Know

Ambivalent Change in CDS Spreads in 11 Euro Area Countries

One of the macroeconomic consequences of the COVID-19 epidemic is that the global economy has seen a robust increase in the countries‘ gross external debt and the sovereign public debt that is part of it. Nor have the eurozone Member States escaped this effect. The increase in gross external debt and sovereign government debt also means that it has become theoretically more risky for investors to buy debt securities (typically bonds). Theoretically, however, it follows that as a result of the increase in risks in the country, CDS spreads had to rise as well. The study uses a correlation calculation to show that the development of the price of CDSs is more closely correlated with gross government debt than with gross external debt. Using hierarchical cluster analysis, the study groups the countries of the Eurozone. The basis for clustering is the close relationship between a country‘s gross government debt and its CDS spread over the period under review. A relevant conclusion of the study is that the increase in gross government debt was not followed by an increase in CDS spreads because the financial source of the increase in government debt was different from previous years.

АНАЛІЗ ЦИФРОВИХ ТЕХНОЛОГІЙ ФОНДОВОЇ БІРЖОВОЇ ТОРГІВЛІ В УКРАЇНІ

Activation of investment activity for the recovery of the economy after the corona crisis requires the development of stock exchange trading as part of trading in state securities, municipal securities, corporate securities, etc. Institutional, organizational and technical conditions have not been created for the development of stock exchange trading in Ukraine. The purpose of the article is to study the current state of digital technologies of stock exchange trading in Ukraine. An analysis of stock exchange trading in Ukraine was carried out based on the analysis of general activity on the stock market, analysis of stock market segments and activities of operators of organized markets. In 2014–2017, the stock market of Ukraine was in a state of stagnation due to a decrease in trading volumes. The recovery of the activity of stock market participants took place in 2018–2021. Activity on the stock market of Ukraine is ensured mainly in the secondary segment. The share of the secondary market in the stock market of Ukraine in 2014–2021 was more than 97%. The digital technologies of the stock exchange "Perspektiva" (Electronic trading system, BIT eTrade Mail, BIT eTrade, BIT eTrade Future, BIT eTrade IPO, BIT ePayment, BIT eReport, etc.) are characterized. Further restoration of stock exchange trading in Ukraine and use of the potential of the stock market for the needs of economic recovery is possible only under certain conditions. There are an increase in the number of issuers of debt securities and equity securities, publicity of information about the stock market and stock market participants, protection of stock market participants, improvement of financial literacy of the population, improvement of digital technologies of stock exchange trading. It is possible to improve digital technologies and activate the digitization of stock exchange trading in Ukraine through the development of software products and mobile applications for all stock trading participants, the use of artificial intelligence, Big Data for the formation and organization of information on the stock market, the integration of digital technologies of stock exchange trading with state registers and open data services.

Causal Relationship between Selected Financial Development Indicators and Economic Growth in Nigeria from 1985-2016

The study examines the causal relationship between selected financial development indicators and economic growth in Nigeria. The study used quarterly data from the statistical bulletin of the Central Bank of Nigeria from (1985Q1-2016Q4). The study employs Granger causality test and Vector Autoregressive (VAR) estimation techniques. The findings show a bidirectional causality between money supply to gross domestic product on real gross domestic product. There is also unidirectional relationship between private debt to total debt securities (domestic) on real gross domestic product while there is no causality between lending-deposits spread and liquidity ratio on RGDP. The study therefore recommends that government should further undertake financial reforms; build a robust infrastructure, legal system and an enabling business environment capable of attracting quality investments, promote real sector growth and development as well as job creation and economic growth. Government should also introduce policies aimed at enhancing financial inclusion and boosting financial access in Nigeria. Attention should be given to the money supply in the economy to ensure that the money in circulation is within the growth target in order to achieve price stability and accelerated growth.

ЕФЕКТИВНІСТЬ ФУНКЦІОНУВАННЯ ГРОШОВОГО КАНАЛУ МОНЕТАРНОЇ ТРАНСМІСІЇ В УКРАЇНІ

The article provides a comprehensive analysis of the monetary channel of monetary transmission in Ukraine in 2005–2021, identifies tools and mechanisms for its use, and describes the specifics of functioning in the monetary regulation of the economy in political and economic instability. It is proved that in the conditions of Ukraine the monetary channel of monetary transmis-sion plays an important role in the system of monetary regulation of the economy, and the main purpose of its use is to ensure optimal proportions between supply and demand of money and balanced money market development. It is determined that in 2005–2021 the efficiency of the monetary channel of monetary transmission in Ukraine was low, and its operation was subject to the use of mainly interest, currency and credit channels. It is substantiated that the main reasons for the inefficiency of the monetary channel of monetary transmission were the central bank's underestimation of the role of the monetary channel in the monetary regulation of the economy, unbalanced structure and dynamics of the monetary base and monetary aggregates, and low money multiplication rate. It is proved that the dynamics of monetary aggregate M3 had the most significant impact on the growth rate of real GDP in the analyzed period. It was found that the influence of the dynamics of monetary aggregates on curb-ing inflation was insignificant, which corresponds to the provisions of the theory of "money neutrality". Based on the analysis of the practice of using the monetary channel of monetary transmission, three cycles of monetary and macroeconomic dynamics are distinguished: 1) 2005–2009; 2) 2010–2015; 3) 2016–2021, their features and the nature of the relationship between the studied indicators are determined. It is proved that in the conditions of complicated economic development it is necessary to change the approaches to the mechanisms of monetary transmission monetary channel by strengthening its role in forming the main monetary proportions and increasing the coordination of monetary and fiscal policy, in particular, in issuing and trading government debt securities, public debt service and state budget deficit. It is argued that in the medium term the growth rate of the monetary base and monetary aggregates should be as consistent as possible with the dynamics of real GDP and the ability to curb inflation, and the rate of return on domestic government debt should not exceed the base interest rate. Priority measures to improve the efficiency of the monetary transmission monetary channel in Ukraine should be: strengthening the stability of the banking system, balancing the supply and demand of money, improving methods of forming the volume and structure of monetary base and monetary aggregates, and improving monetary and fiscal policy coordination. implementation by the central bank of a balanced monetary policy adequate to real economic conditions.

Трансформация денежно-кредитной политики ЕС в условиях финансовой нестабильности

Challenges the European economy began to face 12 years ago raised the question about actions European Central Bank (ECB) have to undertake to maintain the financial sustainability, considering its objective to ensure price stability while coping with a changed economic environment. Provision that the ECB is obliged to take efforts to ensure financial stability as well as potentially serious consequences of crisis’ impact on the banking system and industrial production, led to an expansion of its role beyond standard monetary policy measures, with the unconventional steps being taken in addition to conventional to combat the adverse impact of the financial crisis. While reducing the interest rate, ECB also provided a cheap financial capital for banks via fixed-rate “Long Term Refinancing Operations” (LTROs), and three “Covered Bond Purchase Programmes” (CBPP). Purchases of debt securities were also conducted via “Securities Market Programme” (SMP) and, later, with then ECB’s President Mario Draghi declaring that ECB will do “whatever it takes to preserve the euro”, possibility of their increase was announced with the start of “Outright Monetary Transactions” (OMT) Programme. A mere announcement of the OMT was enough to calm financial markets, as none of the eurozone countries applied for financial support within this programme’s framework. Then ECB proceeded with a full-fledged quantitative easing, starting to buy sovereign bonds under its Public Sector Purchase Programme (PSPP), having spent 2.6 trillion € on its implementation. Understanding that a monetary union without an efficient banking union is unacceptably dangerous, the European Banking Union, under which supervision of largest eurozone banks has transferred directly to the ECB, was progressively established. While ECB’s anti-crisis policies achieved their goals, prolongation of the strategy it adopted may create new risks for the financial stability of the euro area, such as excessive dependence of credit institutions on monetary support and excessive inflationary risks under a zero interest-rate policy. Still, EU institutions’ coordinated financial management played an important role in overcoming the existing turbulence, with fiscal and monetary policy measures reinforcing each other.

Debt enforcement and the cost of debt financing in M&As

We examine whether the debt enforcement affects the cost of debt securities in M&A transactions in 28 countries. Strong enforcement lowers the yield of securities. We show that legal enforcement affects the offering yield through the priority rule for creditors, which means senior debt creditors are paid in full first. The offering yield is higher for a security when a higher proportion of subordinated debts is used in an M&A transaction. However, strong enforcement improves a lender's chance of being paid back even for subordinated debt, so the offering yield is lower for subordinated debt in countries with better enforcement.

Certain aspects of current state of domestic financial market

Introduction. The financial market, as a combination of exchange and redistribution relations associated with the processes of purchase and sale of financial resources is a complex system that is an indicator of the development of the economy as a whole. In the context of global challenges, the development trends of the financial market and its components are expanding. The securities market today occupies an increasing segment of the financial market, despite the fact that it is under development. Recently, it is characterized by a high level of dynamism. And already now it has positive results for the participants. Purpose. A study of the securities market, the structure of its financial instruments and the circle of participants. Results. Modern financial processes are characterized by the emergence of new financial instruments and technologies, which expands and forms an alternative to the placement and attraction of financial resources outside of banking institutions and increases the circle of participants. An example is the emergence of Internet trading. Internet trading is a system of securities work that gives the investor access to exchange information, and also makes it possible to conclude transactions on the purchase and sale of securities on the exchange in real time using a special certified program installed on a personal computer. The expansion of the range of financial instruments that contribute to the increase of the circle of participants in the financial process in the stock market occurred at the expense of Bonds of Internal Government Loans of Ukraine, whose income rates are higher then bank. They became the first hryvnia instruments included in the global indices of debt securities MVIS (MV Index Solutions. Also in October this year, the National Commission on Securities and Stock Market decided to allow the circulation of foreign securities in Ukraine. As a result, today Ukrainian investors can use the opportunity to invest in 85 securities of foreign issuers. All this makes it possible to obtain additional financial resources for both individual (households) and collective entities (communities). Conclusion. Domestic government bonds are effective financial instruments for the majority of participants in the investment process in the stock market are the first hryvnia instruments to be included in the the global MVIS debt securities indices. There is also a tendency to expand the circle of participants and the structure of financial instruments of the Ukrainian stock market due to the possibility of purchasing state securities by territorial communities, as well as admission of foreign securities by the Cabinet of Ministers of Ukraine.

A RESEARCH ON THE CAUSAL RELATIONSHIP BETWEEN INVESTMENT PREFERENCES

This study aims to measure the causal relationship between the dollar and euro at exchange rates among today's investment instruments and the deposit interest rate, Gold, Bist xu100 and the index of government domestic debt securities.Dec. Dec. The data in the study are daily data between 17/08/2017-26/05/2021 and were selected from a recent time Dec. Data with CBRT evds resources investing.com retrieved from. In this way, it is possible to see how variables adapt to today's financial world and the pandemic period. The method of the study is the Granger causality test, which is often used in time series analysis. When individuals make investment choices, they choose according to the fact that macro variables such as inflation, growth rate, and Exchange Rates fluctuate during periods of crisis and recession. This often affects even the credit demands of institutional investors. Central banks want to influence macro variables with various intervention tools, but because the economies of some countries are fragile, individuals can often suffer even as a result of these optimistic policies. According to the results of this study, the dependent variable in the model where the BIST100 index of the dollar and gold values, the probability of 0.000<0.05 causal relationship is true of dollars for deposit in the model where the dependent variable is the interest rate of government securities of the index, the probability value of 0.0001 p<0.05 and Bist100 index 0.0162 probability value<0.05 and the probability for the value of the dollar 0.02<0.05 can be considered to be a causal relationship due to being towards deposit rates. The probability of the dependent variable in a model of the euro BIST100 index value 0.0001 p<0.05, gold probability value of 0.000<0.05 Euros causal relationship is true for government securities in another model where the dependent variable of 0.0040 p<0.05 probability value from deposits with interest ,0.0000 p<0.05 0.0043 Bist100 index and the probability value p<0.05 is the probability for the value of government securities under de towards causality can be said. In a model in which the Bist100 index is a dependent variable, there was a causal relationship towards the Bist100 index ,as the probability value of the euro was 0.0012<0.05, the probability value of gold was 0.0000<0.05, the probability value of government domestic debt securities was 0.0013<0.05, and the probability value of the dollar was 0.0007<0.05. Finally, the model in which gold is a dependent variable concluded that there is no causal relationship between the Euro, dollar, dibs and Bist100 index and deposit interest to gold, since the probability values of other variables are greater than 0.05.

Security design without verifiable retention

This paper studies security design with adverse selection when verifiable retention is impossible due to market segmentation and price opacity across market segments. Rather than signaling through retention, sellers in the model signal quality through posted prices, which is feasible because the posted price affects buyers' search behavior and the equilibrium probability of selling. The optimal security design, in this case, is to break up the cash flow of an asset into several debt securities of increasing seniority. The size of senior relative to subordinated debts is affected by the equilibrium markup. Search frictions, as determinants of the markup, shape the endogenous creation of financial securities.

Regulatory Treatment of Changes in Fair Value and the Composition of Banks' Investment Portfolios

ABSTRACTFollowing the financial crisis of 2007–2008, Basel III recommended that bank regulators include changes in the fair value of available-for-sale (AFS) debt securities in Tier 1 capital. However, the U.S. allowed smaller banks to continue excluding these changes through a one-time opt out election. This paper examines the investment decisions of smaller banks in the 1990s when changes in the fair value of AFS debt securities were temporarily included in regulatory capital. Using a sample of smaller banks and a difference-in-differences research design, we find that low-capitalized banks reduced their investments in more volatile asset classes (e.g., corporate bonds, non-agency MBS) and increased their investments in less volatile asset classes (e.g., treasuries and municipal bonds) after these changes were included. These findings suggest that providing smaller banks with an opt out election potentially allows low-capitalized, riskier banks to continue to hold more volatile securities in their AFS portfolios.JEL Classifications: M41; M48; G18; G21.

Brazilian Monetary Policy’s Influence on Investment Funds’ Allocation in Corporate Bonds

The aim of this paper is to understand how monetary policy influence investment funds’ allocation in corporate bonds. This assumption is in line with the perspective that several factors influence funds’ allocation process, especially changes in a country's economic scenario. The sample of this study is comprised of 352 equity funds and 1,085 multimarket funds, during the period from December 2009 to July 2020. I used multivariate regression with panel data for hypotheses testing. I noted a small percentage of funds’ investment in corporate bonds, in other words, only about 1.3% of total net of asset. In addition, multimarket funds used to invest more in debentures than equity funds. Concerning the regression model, the interest rate (Selic) had a positive association with funds’ amount allocated in corporate bonds. It is a result of Brazilian context, whose corporate bonds are indexed according to DI rate. As expected, I observed a positive relationship between inflation rate and funds’ investment in debentures, which reveals that the fear of deflation causes investors to increase the percentages invested in corporate debt securities. As respects funds’ features, time and minimum balance, do not guarantee more investment in corporate bonds. Thus, this paper contributes to the literature for bringing monetary policy closer to capital market and discussing an emerging country’s funds industry. In this way, it is relevant because it involves an important source of credit for companies, based on data from institutional investors.

Socio-Demographic Impacts on the Personal Savings Portfolio Choice

Insufficiently developed financial system, poor standard of living and inappropriate education of citizens on the saving products, lead to low level of investment in the financial market of developing countries. In this paper special attention is paid to examining the socio-demographic profile of Montenegrin citizens that invest their funds in some of the offered form of savings, as well as examining main factors that restrict their investment. For this purpose, data collected through the survey of Montenegrin citizens were processed using Decision Tree method. Survey results have shown that there is a low level of savings, as well as that citizens prefer deposits and life insurance products rather than pension plans and debt securities. Also, the results indicate that the main causes of the current state of savings in Montenegro are low standard of living, citizens´ poor awareness and the financial system which causes the insufficiently attractive supply of savings.