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Modelling Early Withdrawals in Term Deposits: Case of a Portuguese Bank
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Resumo(s)
It is the purpose of this master's thesis to investigate the main factors contributing to early
redemption of term deposits as well as model this customer behavior. More specifically, it
explores the influence of five categories (i) Reinvestment; (ii) Default; (iii) Liquidity; and (iv)
Portfolio specifications on term deposit withdrawals. In this paper, we use data from March
2010 and March 2024 collected from a Portuguese bank. Further, the variables are selected
based on their Pearson correlation coefficients in order to prevent multicollinearity. Based on
the results obtained from the multiple linear regression model developed, we concluded that
most clients redeemed their funds from term deposits due to the higher returns offered by
alternative savings products. Additionally, other factors such as economic sentiment, default
risk, liquidity requirements, and deposit characteristics appear to be significant in this
particular case. This research contributes to understanding consumer behavior regarding
financial products, and it has a significant impact on the competitive pricing of deposit
products and the risk management of banks' interest rates.
Descrição
Dissertation presented as the partial requirement for obtaining a Master's degree in Statistics and Information Management, specialization in Risk Analysis and Management
Palavras-chave
Depositor behavior Term deposits Early withdrawals Default Reinvestment Liquidity needs Portfolio specification Multiple linear regression