Forecasting Bankruptcy More Accurately: A Simple Hazard Model
I argue that hazard models are more appropriate than single-period models for forecasting bankruptcy. Single-period models are inconsistent, while hazard models produce consistent estimates. I describe a simple technique for estimating a discrete-time hazard model. I find that about half of the accounting ratios that have been used in previous models are not statistically significant. Moreover, market size, past stock returns, and idiosyncratic returns variability are all strongly related to bankruptcy. I propose a model that uses both accounting ratios and market-driven variables to produce out-of-sample forecasts that are more accurate than those of alternative models. Copyright 2001 by University of Chicago Press.
When requesting a correction, please mention this item's handle: RePEc:ucp:jnlbus:v:74:y:2001:i:1:p:101-24. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.