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Implications of Stratified Sampling for Fair Lending Binary Logit Models

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Author Info
Judith Clarke ()
Marsha Courchane ()

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Abstract

We examine the effect of sample design on estimation and inference for disparate treatment in binary logistic models used to assess for fair lending. Our Monte Carlo experiments provide information on how sample design affects efficiency (in terms of mean squared error) of estimation of the disparate treatment parameter and power of a test for statistical insignificance of this parameter. The sample design requires two decision levels: first, the degree of stratification of the loan applicants (Level I Decision) and secondly, given a Level I Decision, how to allocate the sample across strata (Level II Decision). We examine four Level I stratification strategies: no stratification (simple random sampling), exogenously stratifying loan cases by race, endogenously stratifying cases by loan outcome (denied or approved), and stratifying exogenously by race and endogenously by outcome. Then, we consider five Level II methods: proportional, balanced, and three designs based on applied studies. Our results strongly support the use of stratifying by both race and loan outcome coupled with a balanced sample design when interest is in estimation of, or testing for statistical significance of, the disparate treatment parameter. Copyright Springer Science + Business Media, Inc. 2004

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File URL: http://hdl.handle.net/10.1007/s11146-004-4829-5
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Publisher Info
Article provided by Springer in its journal The Journal of Real Estate Finance and Economics.

Volume (Year): 30 (2004)
Issue (Month): 1 (October)
Pages: 5-31
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Handle: RePEc:kap:jrefec:v:30:y:2004:i:1:p:5-31

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Web page: http://www.springerlink.com/link.asp?id=102945

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Related research
Keywords: logistic regression; stratified sampling; choice-based sampling; Monte Carlo experiment;

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References listed on IDEAS
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.:
  1. Frank Windmeijer, 1995. "Goodness-of-fit measures in binary choice models," Econometric Reviews, Taylor and Francis Journals, vol. 14(1), pages 101-116. [Downloadable!] (restricted)
  2. N. E. Breslow & N. Chatterjee, 1999. "Design and analysis of two-phase studies with binary outcome applied to Wilms tumour prognosis," Journal Of The Royal Statistical Society Series C, Royal Statistical Society, vol. 48(4), pages 457-468. [Downloadable!] (restricted)
  3. Robert Avery & Patricia Beeson & Paul Calem, 1997. "Using HMDA Data as a Regulatory Screen for Fair Lending Compliance," Journal of Financial Services Research, Springer, vol. 11(1), pages 9-42, February. [Downloadable!] (restricted)
  4. Munnell, Alicia H. & Geoffrey M. B. Tootell & Lynn E. Browne & James McEneaney, 1996. "Mortgage Lending in Boston: Interpreting HMDA Data," American Economic Review, American Economic Association, vol. 86(1), pages 25-53, March.
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  5. Paul Calem & Michael Stutzer, 1995. "The simple analytics of observed discrimination in credit markets," Working Papers 95-7, Federal Reserve Bank of Philadelphia.
  6. Calem Paul & Stutzer Michael, 1995. "The Simple Analytics of Observed Discrimination in Credit Markets," Journal of Financial Intermediation, Elsevier, vol. 4(3), pages 189-212, July. [Downloadable!] (restricted)
  7. Mitchell Stengel & Dennis Glennon, 1999. "Evaluating Statistical Models of Mortgage Lending Discrimination: A Bank-Specific Analysis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 27(2), pages 299-334. [Downloadable!] (restricted)
  8. Day, Theodore E & Liebowitz, S J, 1998. "Mortgage Lending to Minorities: Where's the Bias?," Economic Inquiry, Oxford University Press, vol. 36(1), pages 3-28, January.
  9. Calem, Paul S & Longhofer, Stanley D, 2002. "Anatomy of a Fair Lending Exam: The Uses and Limitations of Statistics," The Journal of Real Estate Finance and Economics, Springer, vol. 24(3), pages 207-37, May. [Downloadable!] (restricted)
  10. Ladd, Helen F, 1998. "Evidence on Discrimination in Mortgage Lending," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 41-62, Spring. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Judith A. Clarke & Marsha J. Courchane & Nilanjana Roy, 2005. "On the Robustness of Racial Discrimination Findings in Mortgage Lending Studies," Econometrics Working Papers 0516, Department of Economics, University of Victoria. [Downloadable!]
  2. Judith A. Clarke & Nilanjana Roy & Marsha J. Courchane, 2006. "On the Robustness of Racial Disrcimination Findings in Motgage Lending Studies," Econometrics Working Papers 0604, Department of Economics, University of Victoria. [Downloadable!]
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