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Forecasting Corporate Distress in the Asian and Pacific Region

Author

Listed:
  • Russ Moro
  • Wolfgang Härdle
  • Saeideh Aliakbari
  • Linda Hoffmann

Abstract

This study analyses credit default risk for firms in the Asian and Pacific region by applying two methodologies: a Support Vector Machine (SVM) and a logistic regression (Logit). Among different financial ratios suggested as predictors of default, leverage ratios and the company size display a higher discriminating power compared to others. An analysis of the dependencies between PD and financial ratios is provided along with a comparison with Europe (Germany). With respect to forecasting accuracy the SVM has a lower model risk than the Logit on average and displays a more robust performance. This result holds true across different years.

Suggested Citation

  • Russ Moro & Wolfgang Härdle & Saeideh Aliakbari & Linda Hoffmann, 2011. "Forecasting Corporate Distress in the Asian and Pacific Region," SFB 649 Discussion Papers SFB649DP2011-023, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  • Handle: RePEc:hum:wpaper:sfb649dp2011-023
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    References listed on IDEAS

    as
    1. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-370, March.
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    6. Meitz, Mika & Terasvirta, Timo, 2006. "Evaluating Models of Autoregressive Conditional Duration," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 104-124, January.
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    8. Paul Embrechts, 2009. "Linear Correlation and EVT: Properties and Caveats," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 7(1), pages 30-39, Winter.
    9. Robert F. Engle & Jeffrey R. Russell, 1998. "Autoregressive Conditional Duration: A New Model for Irregularly Spaced Transaction Data," Econometrica, Econometric Society, vol. 66(5), pages 1127-1162, September.
    10. Alfonso Dufour & Robert F Engle, 2000. "The ACD Model: Predictability of the Time Between Concecutive Trades," ICMA Centre Discussion Papers in Finance icma-dp2000-05, Henley Business School, Reading University.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Credit risk; Bankruptcy; Asian companies; SVM;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics

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