Prediction of bankruptcy Iranian corporations through artificial neural network and Probit-based analyses

In this study, multilayer perceptron (MLP) of artificial neural networks is utilized to build a new model for bankruptcy prediction. A precise MLP-based relationship is obtained to classify samples of 136 bankrupt and non-bankrupt Iranian corporations using their financial ratios. A Probit analysis is performed to benchmark the MLP model. Ratios of sales to current assets ratio, operational income to sales, quick assets to total assets, and total liability to total assets are used as the effective predictive financial ratios. A comparative study is further conducted on the classification accuracy of the MLP, Probit, and other existing models. The proposed MLP model has a significantly better performance than the Probit and other models found in the bankruptcy prediction literature.     

HYBRID GENETIC PROGRAMMING-BASED SEARCH ALGORITHMS FOR ENTERPRISE BANKRUPTCY PREDICTION

Bankruptcy is an extremely significant worldwide problem that affects the economic well- being of all countries. The high social costs incurred by various stakeholders associated with bankrupt firms imply the need to search for better theoretical understanding and prediction quality. The main objective of this paper is to apply genetic programming with orthogonal least squares (GP/OLS) and with simulated annealing (GP/SA) algorithms to build models for bankruptcy prediction. Utilizing the hybrid GP/OLS and GP/SA techniques, generalized relationships are obtained to classify samples of 136 bankrupt and nonbankrupt Iranian corporations based on financial ratios. Another important contribution of this paper is to identify the effective predictive financial ratios based on an extensive bankruptcy prediction literature review and a sequential feature selection (SFS) analysis. A comparative study on the classification accuracy of the GP/OLS- and GP/SA-based models is also conducted. The observed agreement between the predictions and the actual values indicates that the proposed models effectively estimate any enterprise with regard to the aspect of bankruptcy. According to the results, the proposed GP/SA model has better performance than the GP/OLS model in bankruptcy prediction.     

Novel feature selection methods to financial distress prediction

Financially distressed prediction (FDP) has been a widely and continually studied topic in the field of corporate finance. One of the core problems to FDP is to design effective feature selection algorithms. In contrast to existing approaches, we propose an integrated approach to feature selection for the FDP problem that embeds expert knowledge with the wrapper method. The financial features are categorized into seven classes according to their financial semantics based on experts’ domain knowledge surveyed from literature. We then apply the wrapper method to search for “good” feature subsets consisting of top candidates from each feature class. For concept verification, we compare several scholars’ models as well as leading feature selection methods with the proposed method. Our empirical experiment indicates that the prediction model based on the feature set selected by the proposed method outperforms those models based on traditional feature selection methods in terms of prediction accuracy.     

Financial failure prediction using efficiency as a predictor

Corporate financial failure prediction is of critical importance for decision making of managers, investors and shareholders. In current financial failure prediction models, various financial ratios are usually selected as prediction variables, which implicates that these financial ratios represent the possible cause of financial failure. It is widely recognized that a main cause of financial failure is poor management, and that business operation efficiency is a good reflection of a firm’s management. In this paper, we propose a financial failure prediction model using efficiency as a predictor variable. In the proposed method, data envelopment analysis (DEA) are employed as a tool to evaluate the input/output efficiency of each corporation. To verify the efficacy of efficiency as a predictor, we use the data of corporations listed in Shanghai stock exchange (SSE), and compare the accuracy of the same prediction method with and without the variable. Experimental results of three main financial failure prediction models, i.e., multiple discriminant approach (MDA), logistic regression, and support vector machines (SVMs), all suggest that efficiency is an effective predictor variable.     

Feature selection to diagnose a business crisis by using a real GA-based support vector machine: An empirical study

This research is aimed at establishing the diagnosis models for business crises through integrating a real-valued genetic algorithm to determine the optimum parameters and SVM to perform learning and classification on data. After finishing the training processes, the proposed GA-SVM can reach a prediction accuracy of up to 95.56% for all the tested business data. Particularly, only six influential features are included in the proposed model with intellectual capital and financial features after the 2-phase selecting process; the six features are ordinary and widely available from public business reports. The proposed GA-SVM is available for business managers to conduct self-diagnosis in order to realize whether business units are really facing a crisis.     

Ratio Selection for Classification Models

This paper is concerned with the selection of inputs for classification models based on ratios of measured quantities. For this purpose, all possible ratios are built from the quantities involved and variable selection techniques are used to choose a convenient subset of ratios. In this context, two selection techniques are proposed: one based on a pre-selection procedure and another based on a genetic algorithm. In an example involving the financial distress prediction of companies, the models obtained from ratios selected by the proposed techniques compare favorably to a model using ratios usually found in the financial distress literature.     

A cross model study of corporate financial distress prediction in Taiwan: Multiple discriminant analysis, logit, probit and neural networks models

In 2008, financial tsunami started to impair the economic development of many countries, including Taiwan. The prediction of financial crisis turns to be much more important and doubtlessly holds public attention when the world economy goes to depression. This study examined the predictive ability of the four most commonly used financial distress prediction models and thus constructed reliable failure prediction models for public industrial firms in Taiwan. Multiple discriminate analysis (MDA), logit, probit, and artificial neural networks (ANNs) methodology were employed to a dataset of matched sample of failed and non-failed Taiwan public industrial firms during 1998–2005. The final models are validated using within sample test and out-of-the-sample test, respectively. The results indicated that the probit, logit, and ANN models which used in this study achieve higher prediction accuracy and possess the ability of generalization. The probit model possesses the best and stable performance. However, if the data does not satisfy the assumptions of the statistical approach, then the ANN approach would demonstrate its advantage and achieve higher prediction accuracy. In addition, the models which used in this study achieve higher prediction accuracy and possess the ability of generalization than those of [Altman, Financial ratios—discriminant analysis and the prediction of corporate bankruptcy using capital market data, Journal of Finance 23 (4) (1968) 589–609, Ohlson, Financial ratios and the probability prediction of bankruptcy, Journal of Accounting Research 18 (1) (1980) 109–131, and Zmijewski, Methodological issues related to the estimation of financial distress prediction models, Journal of Accounting Research 22 (1984) 59–82]. In summary, the models used in this study can be used to assist investors, creditors, managers, auditors, and regulatory agencies in Taiwan to predict the probability of business failure.     

Predicting corporate financial distress based on integration of decision tree classification and logistic regression

Lately, stock and derivative securities markets continuously and rapidly evolve in the world. As quick market developments, enterprise operating status will be disclosed periodically on financial statement. Unfortunately, if executives of firms intentionally dress financial statements up, it will not be observed any financial distress possibility in the short or long run. Recently, there were occurred many financial crises in the international marketing, such as Enron, Kmart, Global Crossing, WorldCom and Lehman Brothers events. How these financial events affect world’s business, especially for the financial service industry or investors has been public’s concern. To improve the accuracy of the financial distress prediction model, this paper referred to the operating rules of the Taiwan Stock Exchange Corporation (TSEC) and collected 100 listed companies as the initial samples. Moreover, the empirical experiment with a total of 37 ratios which composed of financial and other non-financial ratios and used principle component analysis (PCA) to extract suitable variables. The decision tree (DT) classification methods (C5.0, CART, and CHAID) and logistic regression (LR) techniques were used to implement the financial distress prediction model. Finally, the experiments acquired a satisfying result, which testifies for the possibility and validity of our proposed methods for the financial distress prediction of listed companies.This paper makes four critical contributions: (1) the more PCA we used, the less accuracy we obtained by the DT classification approach. However, the LR approach has no significant impact with PCA; (2) the closer we get to the actual occurrence of financial distress, the higher the accuracy we obtain in DT classification approach, with an 97.01% correct percentage for 2 seasons prior to the occurrence of financial distress; (3) our empirical results show that PCA increases the error of classifying companies that are in a financial crisis as normal companies; and (4) the DT classification approach obtains better prediction accuracy than the LR approach in short run (less one year). On the contrary, the LR approach gets better prediction accuracy in long run (above one and half year). Therefore, this paper proposes that the artificial intelligent (AI) approach could be a more suitable methodology than traditional statistics for predicting the potential financial distress of a company in short run.     

基于新闻文本的上市公司财务困境组合预测模型

已有上市公司财务困境预测模型主要是基于结构化数据进行研究,为进一步提高上市公司财务困境预测模型准确率,本文将非结构化数据引入上市公司财务困境预测问题中,研究了基于新闻文本分类的上市公司财务困境预测模型,结合新闻文本信息和财务信息提出上市公司财务困境组合预测模型。本文首先将新闻数据进行预处理,然后基于新闻文本数据通过支持向量机（SVM）进行财务困境预测,同时基于财务数据通过Logistic模型进行财务困境预测,最后采用阈值表决集成策略整合两种模型的预测结果,实验结果证明了模型的有效性。     

A support vector machine based MSM model for financial short-term volatility forecasting

Financial time series forecasting has become a challenge because of its long-memory, thick tails and volatility persistence. Multifractal process has recently been proposed as a new formalism for this problem. An iterative Markov-Switching Multifractal (MSM) model was introduced to the literature. It is able to capture many of the important stylized features of the financial time series, including long-memory in volatility, volatility clustering, and return outliers. The model delivers stronger performance both in- and out-of-sample than GARCH-type models in long-term forecasts. To enhance MSM’s short-term prediction accuracy, this paper proposes a support vector machine (SVM) based MSM approach which exploits MSM model to forecast volatility and SVM to model the innovations. To verify the effectiveness of the proposed approach, two stock indexes in the Chinese A-share market are chosen as the forecasting targets. Comparing with some existing state-of-the-art models, the proposed approach gives superior results. It indicates that the proposed model provides a promising alternative to financial short-term volatility prediction.     

Is grey relational analysis superior to the conventional techniques in predicting financial crisis?

This study proposes a new approach for analyzing the credit risks of banking industry based on the modeling of grey relational analysis (GRA). In order to construct a financial crisis warning system for banking industry, a GRA approach is developed and applied to the real data set with 111 samples. The results of the current model are compared to those of traditional ones, logistic regression and back-propagation neural network. The results illustrate that in the prediction of financially crisis as well as financially sound banks, the proposed GRA model demonstrates better prediction accuracy than the conventional ones. The results also imply that the financial data set one year before the crisis leads to the best accuracy. It is helpful for the establishment of early warning models of financial crisis for banks. The current results show that the proposed GRA provides a novel approach in handling financial crisis warning tasks.     

A novel bankruptcy prediction model based on an adaptive fuzzy k-nearest neighbor method

Bankruptcy prediction is one of the most important issues in financial decision-making. Constructing effective corporate bankruptcy prediction models in time is essential to make companies or banks prevent bankruptcy. This study proposes a novel bankruptcy prediction model based on an adaptive fuzzy k-nearest neighbor (FKNN) method, where the neighborhood size k and the fuzzy strength parameter m are adaptively specified by the continuous particle swarm optimization (PSO) approach. In addition to performing the parameter optimization for FKNN, PSO is also utilized to choose the most discriminative subset of features for prediction. Adaptive control parameters including time-varying acceleration coefficients (TVAC) and time-varying inertia weight (TVIW) are employed to efficiently control the local and global search ability of PSO algorithm. Moreover, both the continuous and binary PSO are implemented in parallel on a multi-core platform. The proposed bankruptcy prediction model, named PTVPSO-FKNN, is compared with five other state-of-the-art classifiers on two real-life cases. The obtained results clearly confirm the superiority of the proposed model in terms of classification accuracy, Type I error, Type II error and area under the receiver operating characteristic curve (AUC) criterion. The proposed model also demonstrates its ability to identify the most discriminative financial ratios. Additionally, the proposed model has reduced a large amount of computational time owing to its parallel implementation. Promisingly, PTVPSO-FKNN might serve as a new candidate of powerful early warning systems for bankruptcy prediction with excellent performance.     

A neural-network-based nonlinear metamodeling approach to financial time series forecasting

In financial time series forecasting, the problem that we often encounter is how to increase the prediction accuracy as possible using the financial data with noise. In this study, we discuss the use of supervised neural networks as a meta-learning technique to design a financial time series forecasting system to solve this problem. In this system, some data sampling techniques are first used to generate different training subsets from the original datasets. In terms of these different training subsets, different neural networks with different initial conditions or training algorithms are then trained to formulate different prediction models, i.e., base models. Subsequently, to improve the efficiency of predictions of metamodeling, the principal component analysis (PCA) technique is used as a pruning tool to generate an optimal set of base models. Finally, a neural-network-based nonlinear metamodel can be produced by learning from the selected base models, so as to improve the prediction accuracy. For illustration and verification purposes, the proposed metamodel is conducted on four typical financial time series. Empirical results obtained reveal that the proposed neural-network-based nonlinear metamodeling technique is a very promising approach to financial time series forecasting.     

Bankruptcy prediction using SVM models with a new approach to combine features selection and parameter optimisation

Due to the economic significance of bankruptcy prediction of companies for financial institutions, investors and governments, many quantitative methods have been used to develop effective prediction models. Support vector machine (SVM), a powerful classification method, has been used for this task; however, the performance of SVM is sensitive to model form, parameter setting and features selection. In this study, a new approach based on direct search and features ranking technology is proposed to optimise features selection and parameter setting for 1-norm and least-squares SVM models for bankruptcy prediction. This approach is also compared to the SVM models with parameter optimisation and features selection by the popular genetic algorithm technique. The experimental results on a data set with 2010 instances show that the proposed models are good alternatives for bankruptcy prediction.     

基于小波神经网络的上市公司财务危机预测①

提出了基于小波神经网络的上市公司财务危机预测模型,分析了公司财务指标的选取方法。小波神经网络的训练采用自适应调整学习率及动量系数的方法,以避免陷入局部极小值。与多元统计方法、Logit及Probit模型进行比较,结果表明,该方法预测精度高,第一类错误及第二类错误显著减小。     

Measuring firm performance using financial ratios: A decision tree approach

Determining the firm performance using a set of financial measures/ratios has been an interesting and challenging problem for many researchers and practitioners. Identification of factors (i.e., financial measures/ratios) that can accurately predict the firm performance is of great interest to any decision maker. In this study, we employed a two-step analysis methodology: first, using exploratory factor analysis (EFA) we identified (and validated) underlying dimensions of the financial ratios, followed by using predictive modeling methods to discover the potential relationships between the firm performance and financial ratios. Four popular decision tree algorithms (CHAID, C5.0, QUEST and C&RT) were used to investigate the impact of financial ratios on firm performance. After developing prediction models, information fusion-based sensitivity analyses were performed to measure the relative importance of independent variables. The results showed the CHAID and C5.0 decision tree algorithms produced the best prediction accuracy. Sensitivity analysis results indicated that Earnings Before Tax-to-Equity Ratio and Net Profit Margin are the two most important variables.     

基于多路交叉的用户金融行为预测

针对通过挖掘用户的金融行为来改善金融领域的服务模式和服务质量的问题,本文提出了一种基于多路交叉特征的用户金融行为预测算法.根据数据包含的属性构建训练的特征,基于因子分解机模型(FM)利用下游行为预测任务对金融数据的特征进行预训练,获取数据特征的隐含向量.引入特征交叉层对金融数据的高阶特征进行提取,解决FM线性模型只能提...     

Efficiently processing deterministic approximate aggregation query on massive data

Financial distress prediction is very important to financial institutions who must be able to make critical decisions regarding customer loans. Bankruptcy prediction and credit scoring are the two main aspects considered in financial distress prediction. To assist in this determination, thereby lowering the risk borne by the financial institution, it is necessary to develop effective prediction models for prediction of the likelihood of bankruptcy and estimation of credit risk. A number of financial distress prediction models have been constructed, which utilize various machine learning techniques, such as single classifiers and classifier ensembles, but improving the prediction accuracy is the major research issue. In addition, aside from improving the prediction accuracy, there have been very few studies that specifically consider lowering the Type I error. In practice, Type I errors need to receive careful consideration during model construction because they can affect the cost to the financial institution. In this study, we introduce a classifier ensemble approach designed to reduce the misclassification cost. The outputs produced by multiple classifiers are combined by utilizing the unanimous voting (UV) method to find the final prediction result. Experimental results obtained based on four relevant datasets show that our UV ensemble approach outperforms the baseline single classifiers and classifier ensembles. Specifically, the UV ensemble not only provides relatively good prediction accuracy and minimizes Type I/II errors, but also produces the smallest misclassification cost.     

大数据驱动的投诉预测模型

随着电信行业市场竞争的不断加剧,用户对服务质量要求逐步提高,导致用户投诉率不断攀升。在此情况下,通过准确预测用户投诉行为来降低用户投诉率成为运营商关注的重点。目前传统的投诉预测模型仅从分类算法和人工调研特征来讨论,而没有充分利用运营商的大数据。因此,提出了在Hadoop/Spark大数据平台上使用并行随机森林来构建用户预测投诉模型,它不仅用到了业务支持系统数据,而且还用到了运营支持系统数据和客服工单数据,并在此基础上进一步增加了反映用户相互关系的图特征和二阶特征。基于上海市某运营商数据的实验结果表明,利用多来源、高维度的特征来训练用户投诉预测模型的精度会明显高于传统方法,在此基础上有针对性地对目标用户采取安抚措施,可以降低用户投诉率,获得较高的商业价值。     

基于表示学习和深度森林的长链非编码RNA编码短肽预测模型

长链非编码RNA（lncRNA）中的小开放阅读框（sORFs）能够编码长度不超过100个氨基酸的短肽。针对短肽预测研究中lncRNA中的sORFs特征不鲜明且高可信度数据尚不充分的问题,提出一种基于表示学习的深度森林（DF）模型。首先,使用常规lncRNA特征提取方法对sORFs进行编码;其次,通过自编码器（AE）进行表示学习来获得输入数据的高效表示;最后,训练DF模型实现对lncRNA编码短肽的预测。实验结果表明,该模型在拟南芥数据集上能够达到92.08%的准确率,高于传统机器学习模型、深度学习模型以及组合模型,且具有较好的稳定性;此外,在大豆与玉米数据集上进行的模型测试中,该模型的准确率分别能达到78.16%和74.92%,验证了所提模型良好的泛化能力。