IDEAS home Printed from https://ideas.repec.org/a/spr/empeco/v53y2017i2d10.1007_s00181-016-1140-2.html

Hurdle models of repayment behaviour in personal loan contracts

Author

Listed:
  • José M. R. Murteira

    (Faculdade de Economia da Universidade de Coimbra)

  • Mário A. G. Augusto

    (Faculdade de Economia da Universidade de Coimbra)

Abstract

This paper proposes a hurdle model of repayment behaviour in loans with fixed instalments. Using information on previous and current contracts, the approach yields a model of customer behaviour, useful, for example, in assessing the impact of determinants of default, a natural concern for credit and behavioural scoring. Under plausible assumptions, a debtor in each period faces a number of missed payments, which depends on his previous repayment decisions; meanwhile, as most debtors are expected to meet financial obligations, the number of missed payments is bound to display excess zeros, with reference to a single-part law. Each sequence of missed payments is modelled by using the binomial thinning, a conceptual tool that allows for dependence between integers by defining the support of consecutive counts. Under suitable assumptions on heterogeneity, the model can be produced under a random effects approach, leading to a two-part panel data model, estimable by quasi-maximum likelihood. The proposed approach is illustrated using a panel data set on personal loans granted by a Portuguese bank.

Suggested Citation

  • José M. R. Murteira & Mário A. G. Augusto, 2017. "Hurdle models of repayment behaviour in personal loan contracts," Empirical Economics, Springer, vol. 53(2), pages 641-667, September.
    • Handle: RePEc:spr:empeco:v:53:y:2017:i:2:d:10.1007_s00181-016-1140-2
    DOI: 10.1007/s00181-016-1140-2
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00181-016-1140-2
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s00181-016-1140-2?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
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Cameron,A. Colin & Trivedi,Pravin K., 2013. "Regression Analysis of Count Data," Cambridge Books, Cambridge University Press, number 9781107667273.
    2. Frank Windmeijer, 2006. "GMM for panel count data models," CeMMAP working papers CWP21/06, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    3. R. K. Freeland & B. P. M. McCabe, 2004. "Analysis of low count time series data by poisson autoregression," Journal of Time Series Analysis, Wiley Blackwell, vol. 25(5), pages 701-722, September.
    4. Cragg, John G, 1971. "Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods," Econometrica, Econometric Society, vol. 39(5), pages 829-844, September.
    5. Rainer Winkelmann, 2004. "Health care reform and the number of doctor visits-an econometric analysis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(4), pages 455-472.
    6. Christian Weiß, 2008. "Thinning operations for modeling time series of counts—a survey," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 92(3), pages 319-341, August.
    7. Schweer, Sebastian & Weiß, Christian H., 2014. "Compound Poisson INAR(1) processes: Stochastic properties and testing for overdispersion," Computational Statistics & Data Analysis, Elsevier, vol. 77(C), pages 267-284.
    8. Esmeralda A. Ramalho & Joaquim J.S. Ramalho & José M.R. Murteira, 2011. "Alternative Estimating And Testing Empirical Strategies For Fractional Regression Models," Journal of Economic Surveys, Wiley Blackwell, vol. 25(1), pages 19-68, February.
    9. Mullahy, John, 1986. "Specification and testing of some modified count data models," Journal of Econometrics, Elsevier, vol. 33(3), pages 341-365, December.
    10. Mansour Aghababaei Jazi & Geoff Jones & Chin-Diew Lai, 2012. "First-order integer valued AR processes with zero inflated poisson innovations," Journal of Time Series Analysis, Wiley Blackwell, vol. 33(6), pages 954-963, November.
    11. Hausman, Jerry & Hall, Bronwyn H & Griliches, Zvi, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," Econometrica, Econometric Society, vol. 52(4), pages 909-938, July.
    12. Jung, Robert C. & Kukuk, Martin & Liesenfeld, Roman, 2006. "Time series of count data: modeling, estimation and diagnostics," Computational Statistics & Data Analysis, Elsevier, vol. 51(4), pages 2350-2364, December.
    13. Heckman, James J & Willis, Robert J, 1977. "A Beta-logistic Model for the Analysis of Sequential Labor Force Participation by Married Women," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 27-58, February.
    14. Wooldridge, Jeffrey M., 1997. "Multiplicative Panel Data Models Without the Strict Exogeneity Assumption," Econometric Theory, Cambridge University Press, vol. 13(5), pages 667-678, October.
    15. Santos Silva, J.M.C. & Murteira, J.M.R., 2009. "Estimation of default probabilities using incomplete contracts data," Journal of Empirical Finance, Elsevier, vol. 16(3), pages 457-465, June.
    16. Gourieroux, Christian & Monfort, Alain & Trognon, Alain, 1984. "Pseudo Maximum Likelihood Methods: Theory," Econometrica, Econometric Society, vol. 52(3), pages 681-700, May.
    17. Bo E. Honoré & Ekaterini Kyriazidou, 2000. "Panel Data Discrete Choice Models with Lagged Dependent Variables," Econometrica, Econometric Society, vol. 68(4), pages 839-874, July.
    18. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(1), pages 225-238.
    19. Pagan, Adrian & Vella, Frank, 1989. "Diagnostic Tests for Models Based on Individual Data: A Survey," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(S), pages 29-59, Supplemen.
    20. Robert Jung & Gerd Ronning & A. Tremayne, 2005. "Estimation in conditional first order autoregression with discrete support," Statistical Papers, Springer, vol. 46(2), pages 195-224, April.
    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. Harald Oberhofer & Michael Pfaffermayr, 2014. "Two-Part Models for Fractional Responses Defined as Ratios of Integers," Econometrics, MDPI, vol. 2(3), pages 1-22, September.
    2. Agostino Capponi & Zhaonan Qu, 2025. "Handling Sparse Non-negative Data in Finance," Papers 2509.01478, arXiv.org.
    3. Majo, M.C., 2010. "A microeconometric analysis of health care utilization in Europe," Other publications TiSEM 1cf5fd2f-8146-4ef8-8eb5-e, Tilburg University, School of Economics and Management.
    4. Kevin Dano & Bo E. Honor'e & Martin Weidner, 2025. "Binary choice logit models with general fixed effects for panel and network data," Papers 2508.11556, arXiv.org.
    5. Layth C. Alwan & Christian H. Weiß, 2017. "INAR implementation of newsvendor model for serially dependent demand counts," International Journal of Production Research, Taylor & Francis Journals, vol. 55(4), pages 1085-1099, February.
    6. V. J. Cano Fernandez & G. Guirao Perez & M. C. Rodriguez Donate & M. E. Romero Rodriguez, 2009. "An analysis of count data models for the study of exclusivity in wine consumption," Applied Economics, Taylor & Francis Journals, vol. 41(12), pages 1563-1574.
    7. Anders Skrondal & Sophia Rabe-Hesketh, 2022. "The Role of Conditional Likelihoods in Latent Variable Modeling," Psychometrika, Springer;The Psychometric Society, vol. 87(3), pages 799-834, September.
    8. Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 39-54.
    9. José M. R. Murteira & Joaquim J. S. Ramalho, 2016. "Regression Analysis of Multivariate Fractional Data," Econometric Reviews, Taylor & Francis Journals, vol. 35(4), pages 515-552, April.
    10. Christian H. Weiß & Annika Homburg & Pedro Puig, 2019. "Testing for zero inflation and overdispersion in INAR(1) models," Statistical Papers, Springer, vol. 60(3), pages 823-848, June.
    11. Mugyenyi, Joel & Sutil, Gabriel Gonzalez & Modi, Vijay, 2025. "Electricity consumption: The role of grid reliability in appliance ownership and usage in Rwanda," Energy Economics, Elsevier, vol. 151(C).
    12. Pierre-Carl Michaud & Konstantinos Tatsiramos, 2005. "Employment Dynamics of Married Women in Europe," Working Papers WR-273, RAND Corporation.
    13. Bo E. Honoré & Luojia Hu & Ekaterini Kyriazidou & Martin Weidner, 2024. "Simultaneity in binary outcome models with an application to employment for couples," Advanced Studies in Theoretical and Applied Econometrics, in: Subal C. Kumbhakar & Robin C. Sickles & Hung-Jen Wang (ed.), Advances in Applied Econometrics, pages 741-777, Springer.
    14. Yoshitsugu Kitazawa, 2012. "An improved theoretical ground for the linear feedback model and a new indicator," Discussion Papers 58, Kyushu Sangyo University, Faculty of Economics.
    15. Koen Jochmans, 2017. "Two-Way Models for Gravity," The Review of Economics and Statistics, MIT Press, vol. 99(3), pages 478-485, July.
    16. Yoshitsugu Kitazawa, 2010. "A forward demeaning transformation for a dynamic count panel data model," Discussion Papers 39, Kyushu Sangyo University, Faculty of Economics.
    17. Wang, Jian & Hicks, Diana, 2015. "Scientific teams: Self-assembly, fluidness, and interdependence," Journal of Informetrics, Elsevier, vol. 9(1), pages 197-207.
    18. Almodóvar, Paloma & Nguyen, Quyen T.K. & Verbeke, Alain, 2021. "An integrative approach to international inbound sources of firm-level innovation," Journal of World Business, Elsevier, vol. 56(3).
    19. Beneito, Pilar & Rochina-Barrachina, María Engracia & Sanchis, Amparo, 2015. "The path of R&D efficiency over time," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 57-69.
    20. Costa-Font, Joan & Jimenez-Martin, Sergi & Vilaplana, Cristina, 2018. "Does long-term care subsidization reduce hospital admissions and utilization?," Journal of Health Economics, Elsevier, vol. 58(C), pages 43-66.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

    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:spr:empeco:v:53:y:2017:i:2:d:10.1007_s00181-016-1140-2. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.