IDEAS home Printed from https://ideas.repec.org/a/wly/isacfm/v13y2005i4p217-250.html
   My bibliography  Save this article

Assessing the predictive performance of artifIcial neural network‐based classifiers based on different data preprocessing methods, distributions and training mechanisms

Author

Listed:
  • Adrian Costea
  • Iulian Nastac

Abstract

We analyse the implications of three different factors (preprocessing method, data distribution and training mechanism) on the classification performance of artificial neural networks (ANNs). We use three preprocessing approaches: no preprocessing, division by the maximum absolute values and normalization. We study the implications of input data distributions by using five datasets with different distributions: the real data, uniform, normal, logistic and Laplace distributions. We test two training mechanisms: one belonging to the gradient‐descent techniques, improved by a retraining procedure, and the other is a genetic algorithm (GA), which is based on the principles of natural evolution. The results show statistically significant influences of all individual and combined factors on both training and testing performances. A major difference with other related studies is the fact that for both training mechanisms we train the network using as starting solution the one obtained when constructing the network architecture. In other words we use a hybrid approach by refining a previously obtained solution. We found that when the starting solution has relatively low accuracy rates (80–90%) the GA clearly outperformed the retraining procedure, whereas the difference was smaller to non‐existent when the starting solution had relatively high accuracy rates (95–98%). As reported in other studies, we found little to no evidence of crossover operator influence on the GA performance. Copyright © 2005 John Wiley & Sons, Ltd.

Suggested Citation

  • Adrian Costea & Iulian Nastac, 2005. "Assessing the predictive performance of artifIcial neural network‐based classifiers based on different data preprocessing methods, distributions and training mechanisms," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 13(4), pages 217-250, December.
  • Handle: RePEc:wly:isacfm:v:13:y:2005:i:4:p:217-250
    DOI: 10.1002/isaf.269
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/isaf.269
    Download Restriction: no

    File URL: https://libkey.io/10.1002/isaf.269?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Pendharkar, Parag C., 2002. "A computational study on the performance of artificial neural networks under changing structural design and data distribution," European Journal of Operational Research, Elsevier, vol. 138(1), pages 155-177, April.
    2. Edmister, Robert O., 1972. "An Empirical Test of Financial Ratio Analysis for Small Business Failure Prediction," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 7(2), pages 1477-1493, March.
    3. Edward I. Altman, 1968. "The Prediction Of Corporate Bankruptcy: A Discriminant Analysis," Journal of Finance, American Finance Association, vol. 23(1), pages 193-194, March.
    4. Marais, Ml & Patell, Jm & Wolfson, Ma, 1984. "The Experimental-Design Of Classification Models - An Application Of Recursive Partitioning And Bootstrapping To Commercial Bank Loan Classifications," Journal of Accounting Research, Wiley Blackwell, vol. 22, pages 87-114.
    5. Beaver, Wh, 1966. "Financial Ratios As Predictors Of Failure," Journal of Accounting Research, Wiley Blackwell, vol. 4, pages 71-111.
    6. Randall S. Sexton & Naheel A. Sikander, 2001. "Data mining using a genetic algorithm‐trained neural network," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 10(4), pages 201-210, December.
    7. Dorsey, Robert E & Mayer, Walter J, 1995. "Genetic Algorithms for Estimation Problems with Multiple Optima, Nondifferentiability, and Other Irregular Features," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 53-66, January.
    8. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    9. Hamer, Michelle M., 1983. "Failure prediction: Sensitivity of classification accuracy to alternative statistical methods and variable sets," Journal of Accounting and Public Policy, Elsevier, vol. 2(4), pages 289-307.
    10. Frydman, Halina & Altman, Edward I & Kao, Duen-Li, 1985. "Introducing Recursive Partitioning for Financial Classification: The Case of Financial Distress," Journal of Finance, American Finance Association, vol. 40(1), pages 269-291, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dimitras, A. I. & Zanakis, S. H. & Zopounidis, C., 1996. "A survey of business failures with an emphasis on prediction methods and industrial applications," European Journal of Operational Research, Elsevier, vol. 90(3), pages 487-513, May.
    2. Hu, Yu-Chiang & Ansell, Jake, 2007. "Measuring retail company performance using credit scoring techniques," European Journal of Operational Research, Elsevier, vol. 183(3), pages 1595-1606, December.
    3. fernández, María t. Tascón & gutiérrez, Francisco J. Castaño, 2012. "Variables y Modelos Para La Identificación y Predicción Del Fracaso Empresarial: Revisión de La Investigación Empírica Reciente," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 15(1), pages 7-58.
    4. Teija Laitinen & Maria Kankaanpaa, 1999. "Comparative analysis of failure prediction methods: the Finnish case," European Accounting Review, Taylor & Francis Journals, vol. 8(1), pages 67-92.
    5. Antonio David Somoza Lopez & Josep Vallverdu Calafell, 2003. "Una comparacion de la seleccion de los ratios contables en los modelos contable-financieros de prediccion de la insolvencia empresarial," Working Papers in Economics 94, Universitat de Barcelona. Espai de Recerca en Economia.
    6. Zeineb Affes & Rania Hentati-Kaffel, 2016. "Predicting US banks bankruptcy: logit versus Canonical Discriminant analysis," Post-Print halshs-01281948, HAL.
    7. Zeineb Affes & Rania Hentati-Kaffel, 2016. "Predicting US banks bankruptcy: logit versus Canonical Discriminant analysis," Documents de travail du Centre d'Economie de la Sorbonne 16016, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    8. Carlos Serrano-Cinca, 1997. "Feedforward neural networks in the classification of financial information," The European Journal of Finance, Taylor & Francis Journals, vol. 3(3), pages 183-202.
    9. Becchetti, Leonardo & Sierra, Jaime, 2003. "Bankruptcy risk and productive efficiency in manufacturing firms," Journal of Banking & Finance, Elsevier, vol. 27(11), pages 2099-2120, November.
    10. Thomas E. McKee, 2003. "Rough sets bankruptcy prediction models versus auditor signalling rates," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 22(8), pages 569-586.
    11. Şaban Çelik, 2013. "Micro Credit Risk Metrics: A Comprehensive Review," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 20(4), pages 233-272, October.
    12. Jordan, Jeffrey L., 1998. "Georgia Water Series -- Issue 3: Evaluating Water System Financial Performance And Financing Options," Faculty Series 16712, University of Georgia, Department of Agricultural and Applied Economics.
    13. Murray Nash & Michael Anstis & Michael Bradbury, 1989. "Testing Corporate Model Prediction Accuracy," Australian Journal of Management, Australian School of Business, vol. 14(2), pages 211-221, December.
    14. Kim, Soo Y. & Upneja, Arun, 2014. "Predicting restaurant financial distress using decision tree and AdaBoosted decision tree models," Economic Modelling, Elsevier, vol. 36(C), pages 354-362.
    15. Jackson, Richard H.G. & Wood, Anthony, 2013. "The performance of insolvency prediction and credit risk models in the UK: A comparative study," The British Accounting Review, Elsevier, vol. 45(3), pages 183-202.
    16. Milagros Vivel-Búa & Rubén Lado-Sestayo & Luis Otero-González, 2016. "Impact of location on the probability of default in the Spanish lodging industry," Tourism Economics, , vol. 22(3), pages 593-607, June.
    17. Suzan Hol, 2006. "The influence of the business cycle on bankruptcy probability," Discussion Papers 466, Statistics Norway, Research Department.
    18. Zhou, Fanyin & Fu, Lijun & Li, Zhiyong & Xu, Jiawei, 2022. "The recurrence of financial distress: A survival analysis," International Journal of Forecasting, Elsevier, vol. 38(3), pages 1100-1115.
    19. Maria H. Kim & Graham Partington, 2015. "Dynamic forecasts of financial distress of Australian firms," Australian Journal of Management, Australian School of Business, vol. 40(1), pages 135-160, February.
    20. Zeineb Affes & Rania Hentati-Kaffel, 2016. "Forecast bankruptcy using a blend of clustering and MARS model - Case of US banks," Post-Print halshs-01314553, HAL.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:isacfm:v:13:y:2005:i:4:p:217-250. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.interscience.wiley.com/jpages/1099-1174/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.