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Hybridizing principles of the Electre method with case-based reasoning for data mining: Electre-CBR-I and Electre-CBR-II

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  • Li, Hui
  • Sun, Jie

Abstract

Electre is an important outranking method developed in the area of decision-aiding. Data mining is a vital developing technique that receives contributions from lots of disciplines such as databases, machine learning, information retrieval, statistics, and so on. Techniques in outranking approaches, e.g. Electre, could also contribute to the development of data mining. In this research, we address the following two issues: a) why and how to combine Electre with case-based reasoning (CBR) to generate corresponding hybrid models by extending the fundamental principles of Electre into CBR; b) the effect on predictive performance by employing evidence vetoing the assertion on the base of evidence supporting the assertion. The similarity measure of CBR is implemented by revising and fulfilling three basic ideas of Electre, i.e. assertion that two cases are indifferent, evidence supporting the assertion, and evidence vetoing the assertion. Two corresponding CBR models are constructed by combining principles of the Electre decision-aiding method with CBR. The first one, named Electre-CBR-I, derives from evidence supporting the assertion. The other one, named Electre-CBR-II, derives from both evidence supporting and evidence vetoing the assertion. Leave-one-out cross-validation and hold-out method are integrated to form 30-times hold-out method. In financial distress mining, data was collected from Shanghai and Shenzhen Stock Exchanges, ANOVA was employed to select features that are significantly different between companies in distress and health, 30-times hold-out method was used to assess predictive performance, and grid-search technique was utilized to search optimal parameters. Original data distributions were kept in the experiment. Empirical results of long-term financial distress prediction with 30 initial financial ratios and 135 initial pairs of samples indicate that Electre-CBR-I outperforms Electre-CBR-II and other comparative CBR models, and Electre-CBR-II outperforms the other comparative CBR models.

Suggested Citation

  • Li, Hui & Sun, Jie, 2009. "Hybridizing principles of the Electre method with case-based reasoning for data mining: Electre-CBR-I and Electre-CBR-II," European Journal of Operational Research, Elsevier, vol. 197(1), pages 214-224, August.
    • Handle: RePEc:eee:ejores:v:197:y:2009:i:1:p:214-224
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    2. Li, Hui & Hong, Lu-Yao & He, Jia-Xun & Xu, Xuan-Guo & Sun, Jie, 2013. "Small sample-oriented case-based kernel predictive modeling and its economic forecasting applications under n-splits-k-times hold-out assessment," Economic Modelling, Elsevier, vol. 33(C), pages 747-761.
    3. Jiang, Cuiqing & Zhou, Yiru & Chen, Bo, 2023. "Mining semantic features in patent text for financial distress prediction," Technological Forecasting and Social Change, Elsevier, vol. 190(C).
    4. Li, Hui & Sun, Jie, 2012. "Forecasting business failure: The use of nearest-neighbour support vectors and correcting imbalanced samples – Evidence from the Chinese hotel industry," Tourism Management, Elsevier, vol. 33(3), pages 622-634.
    5. Jie Sun & Mengjie Zhou & Wenguo Ai & Hui Li, 2019. "Dynamic prediction of relative financial distress based on imbalanced data stream: from the view of one industry," Risk Management, Palgrave Macmillan, vol. 21(4), pages 215-242, December.
    6. Govindan, Kannan & Jepsen, Martin Brandt, 2016. "ELECTRE: A comprehensive literature review on methodologies and applications," European Journal of Operational Research, Elsevier, vol. 250(1), pages 1-29.
    7. Mai, Feng & Tian, Shaonan & Lee, Chihoon & Ma, Ling, 2019. "Deep learning models for bankruptcy prediction using textual disclosures," European Journal of Operational Research, Elsevier, vol. 274(2), pages 743-758.
    8. Doumpos, Michael & Zopounidis, Constantin, 2011. "Preference disaggregation and statistical learning for multicriteria decision support: A review," European Journal of Operational Research, Elsevier, vol. 209(3), pages 203-214, March.

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