The problem of variable selection for financial distress: applying GRASP methaeuristics
AbstractWe use the GRASP procedure to select a subset of financial ratios that are then used to estimate a model of logistic regression to anticipate financial distress on a sample of Spanish firms. The algorithm we suggest is designed "ad-hoc" for this type of variables. Reducing dimensionality has several advantages such as reducing the cost of data acquisition, better understanding of the final classification model, and increasing the efficiency and the efficacy. The application of the GRASP procedure to preselect a reduced subset of financial ratios generated better results than those obtained directly by applying a model of logistic regression to the set of the 141 original financial ratios.
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.
Bibliographic InfoPaper provided by Instituto de Empresa, Area of Economic Environment in its series Working Papers Economia with number wp04-30.
Length: 32 pages
Date of creation: Oct 2004
Date of revision:
Contact details of provider:
Postal: María de Molina, 11. 28006 Madrid
Phone: +34 91 568 96 00
Web page: http://www.ie.edu/esp/claustro/claustro_areas_detalle.asp?id=5
More information through EDIRC
Genetic algorithms; Financial distress; Failure; Financial ratios; Variable selection; GRASP; Metaheuristic;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-07-25 (All new papers)
- NEP-CFN-2005-07-25 (Corporate Finance)
- NEP-CMP-2005-07-25 (Computational Economics)
- NEP-FIN-2005-07-25 (Finance)
- NEP-FMK-2005-07-25 (Financial Markets)
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.:
- Evi Neophytou & Cecilio Mar Molinero, 2004. "Predicting Corporate Failure in the UK: A Multidimensional Scaling Approach," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(5-6), pages 677-710.
- 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.
- Leonardo Becchetti & Jaime Humberto Sierra Gonzalez 2, 2003. "Bankruptcy Risk and Productive Efficiency in Manufacturing Firms," CEIS Research Paper 30, Tor Vergata University, CEIS.
- Varetto, Franco, 1998. "Genetic algorithms applications in the analysis of insolvency risk," Journal of Banking & Finance, Elsevier, vol. 22(10-11), pages 1421-1439, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amada Marcos).
If references are entirely missing, you can add them using this form.