Finance - Research Publications

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Measuring Financial Wellbeing with Self-Reported and Bank Record Data

Comerton-Forde, C ; De New, J ; Salamanca, N ; Ribar, DC ; Nicastro, A ; Ross, J (WILEY, 2022-06)

We develop scales of the financial well‐being of customers of a major Australian bank using self‐reported survey data matched to customer financial records. Using item response theory (IRT) models, we develop: (1) a Reported Financial Wellbeing Scale from information about people’s experiences and perceptions of financial outcomes; and (2) an Observed Financial Wellbeing Scale from financial record measures of customers’ account balances, net spending and payment problems. Each scale reliably differentiates between a wide range of outcomes, and the scale components have similar power to discriminate. We confirm the validity of the scales by estimating predictive models using other measurable characteristics.