A CLASSIFICATION OF THE BANKS IN TURKEY WITH BAYESIAN CLUSTER ANALYSIS BASED ON MIXTURE MODELS

Abstract

Banking sector is an important part of the economy of a country. There are differences and similarities among these banks in terms of some economic and financial indicators. It would be useful to make a classification research about these banks regarding their differences and similarities to provide a reference to the banking sector and investors. In this research, it is aimed to classify the banks in Turkey with respect to several financial and economic indicators. There are two main kind of clustering methods in the literature: Deterministic versus Model-based cluster analysis. Most clustering studies are based on traditional deterministic methods. However, model-based cluster analysis provides a probabilistic approach to clustering. Mixture models are widely used in model based cluster analysis. Bayesian estimation of mixture models in the literature is relatively new. Therefore, in this research, Bayesian cluster analysis based on mixture models is employed and a classification of the banks is made using the selected method.