A semiparametric method for predicting bankruptcy

A semiparametric method for predicting bankruptcy

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Article ID: iaor20083194
Country: United Kingdom
Volume: 26
Issue: 5
Start Page Number: 317
End Page Number: 342
Publication Date: Aug 2007
Journal: International Journal of Forecasting
Authors: , ,
Keywords: forecasting: applications, statistics: general
Abstract:

Bankruptcy prediction methods based on a semiparametric logit model are proposed for simple random (prospective) and case-control (choice-based; retrospective) data. The unknown parameters and prediction probabilities in the model are estimated by the local likelihood approach, and the resulting estimators are analyzed through their asymptotic biases and variances. The semiparametric bankruptcy prediction methods using these two types of data are shown to be essentially equivalent. Thus our proposed prediction model can be directly applied to data sampled from the two important designs. One real data example and simulations confirm that our prediction method is more powerful than alternatives, in the sense of yielding smaller out-of-sample error rates.

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