A new VIKOR-based in-sample-out-of-sample classifier with application in bankruptcy prediction

Jamal Ouenniche, Kais Bouslah, Blanca Pérez-Gladish, Bing Xu

Research output: Contribution to journalArticle

Abstract

Nowadays, business analytics has become a common buzzword in a range of industries, as companies are increasingly aware of the importance of high quality predictions to guide their pro-active planning exercises. The financial industry is amongst those industries where predictive analytics techniques are widely used to predict both continuous and discrete variables. Conceptually, the prediction of discrete variables comes down to addressing sorting problems, classification problems, or clustering problems. The focus of this paper is on classification problems as they are the most relevant in risk-class prediction in the financial
industry. The contribution of this paper lies in proposing a new classifier that performs both in-sample and out-of-sample predictions,where in-sample predictions are devised with a new VIKOR-based classifier and out-of-sample predictions are devised with a CBR-based classifier trained on the risk class predictions provided by the proposed VIKOR-based classifier. The performance of this new non-parametric classification framework is tested on a dataset of firms in predicting bankruptcy. Our findings conclude that the proposed new classifier can deliver a very high predictive performance, which makes it a real contender in industry applications in finance and investment.
Original languageEnglish
Pages (from-to)1-18
Number of pages18
JournalAnnals of Operations Research
Early online date9 Apr 2019
DOIs
Publication statusE-pub ahead of print - 9 Apr 2019

Fingerprint

Classifiers
Industry
Finance
Sorting
Planning

Keywords

  • Bankruptcy
  • CBR
  • In-sample prediction
  • Out-of-sample prediction
  • Risk class prediction
  • VIKOR classifier
  • k-Nearest neighbour classifier

ASJC Scopus subject areas

  • Decision Sciences(all)
  • Management Science and Operations Research

Cite this

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title = "A new VIKOR-based in-sample-out-of-sample classifier with application in bankruptcy prediction",
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A new VIKOR-based in-sample-out-of-sample classifier with application in bankruptcy prediction. / Ouenniche, Jamal; Bouslah, Kais; Pérez-Gladish, Blanca; Xu, Bing.

In: Annals of Operations Research, 09.04.2019, p. 1-18.

Research output: Contribution to journalArticle

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