An ensemble-based model for two-class imbalanced financial problem
AbstractThis study proposes an ensemble-based model (EBM) for the two-class imbalanced classification problem by joining together the support vector machine (SVM), multiple feature selection combination, back-propagation neural network (BPNN) ensemble, and rough set theory (RST). To improve the significance of the rare and specific region belonging to the minority class in the decision region, we take the SVM as a pre-processor to balance the training dataset and use multiple feature selection combination grounded on ensemble learning in order to determine the most representative features from the re-sized dataset. The representative features are then fed into the BPNN ensemble to construct an effective financial pre-warning mechanism. Lacking comprehensibility and readability is one of the fatal weaknesses of an ensemble classifier and it impedes its real-life application. Thus, the study executes RST to extract knowledge from the BPNN ensemble for decision makers to make suitable judgments. Decision makers can take the decision rules as a roadmap to modify a firm's capital structure so as to survive in an extremely turbulent financial market. Empirical results reveal that the introduced EBM's prediction accuracy is very promising in financial risk mining, relative to other detection approaches in this study.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Economic Modelling.
Volume (Year): 37 (2014)
Issue (Month): C ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30411
Artificial neural network; Ensemble learning; Imbalance class; Knowledge extraction; Decision making;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wiginton, John C., 1980. "A Note on the Comparison of Logit and Discriminant Models of Consumer Credit Behavior," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 15(03), pages 757-770, September.
- Qiang Yang & Xindong Wu, 2006. "10 Challenging Problems In Data Mining Research," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., World Scientific Publishing Co. Pte. Ltd., vol. 5(04), pages 597-604.
- Louzis, Dimitrios P. & Vouldis, Angelos T., 2012. "A methodology for constructing a financial systemic stress index: An application to Greece," Economic Modelling, Elsevier, Elsevier, vol. 29(4), pages 1228-1241.
- Gupta, Rangan & Modise, Mampho P., 2012. "South African stock return predictability in the context data mining: The role of financial variables and international stock returns," Economic Modelling, Elsevier, Elsevier, vol. 29(3), pages 908-916.
- Dimitras, A. I. & Slowinski, R. & Susmaga, R. & Zopounidis, C., 1999. "Business failure prediction using rough sets," European Journal of Operational Research, Elsevier, Elsevier, vol. 114(2), pages 263-280, April.
- Öğüt, Hulisi & Doğanay, M. Mete & Ceylan, Nildağ Başak & Aktaş, Ramazan, 2012. "Prediction of bank financial strength ratings: The case of Turkey," Economic Modelling, Elsevier, Elsevier, vol. 29(3), pages 632-640.
- Chi, Li-Chiu, 2009. "Contagion and competitive effects of plan confirmation of reorganization filings: Evidence from the Taiwan Stock Market," Economic Modelling, Elsevier, Elsevier, vol. 26(2), pages 364-369, March.
- Martens, David & Baesens, Bart & Van Gestel, Tony & Vanthienen, Jan, 2007. "Comprehensible credit scoring models using rule extraction from support vector machines," European Journal of Operational Research, Elsevier, Elsevier, vol. 183(3), pages 1466-1476, December.
- Vouldis, Angelos T. & Michaelides, Panayotis G. & Tsionas, Efthymios G., 2010. "Estimating semi-parametric output distance functions with neural-based reduced form equations using LIML," Economic Modelling, Elsevier, Elsevier, vol. 27(3), pages 697-704, May.
- Pawlak, Zdzislaw, 2002. "Rough sets, decision algorithms and Bayes' theorem," European Journal of Operational Research, Elsevier, Elsevier, vol. 136(1), pages 181-189, January.
- Chevallier, Julien, 2012.
"Global imbalances, cross-market linkages, and the financial crisis : a multivariate Markov-Switching analysis,"
Economics Papers from University Paris Dauphine
123456789/8773, Paris Dauphine University.
- Chevallier, Julien, 2012. "Global imbalances, cross-market linkages, and the financial crisis: A multivariate Markov-switching analysis," Economic Modelling, Elsevier, Elsevier, vol. 29(3), pages 943-973.
- Naifar, Nader, 2012. "Modeling the dependence structure between default risk premium, equity return volatility and the jump risk: Evidence from a financial crisis," Economic Modelling, Elsevier, Elsevier, vol. 29(2), pages 119-131.
- Chi, Li-Chiu & Tang, Tseng-Chung, 2007. "Impact of reorganization announcements on distressed-stock returns," Economic Modelling, Elsevier, Elsevier, vol. 24(5), pages 749-767, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.