Improving Forecast of Binary Rare Events Data: A GAM-Based Approach

Silvia Angela Osmetti, Raffaella Calabrese

Risultato della ricerca: Contributo in rivistaArticolo in rivistapeer review

8 Citazioni (Scopus)

Abstract

This paper develops a method for modelling binary response data in a regression model with highly unbalanced class sizes. When the class sizes are highly unbalanced and the minority class represents a rare event, conventional regression analysis, i.e. logistic regression models, could underestimate the probability of the rare event. To overcome this drawback, we introduce a flexible skewed link function based on the quantile function of the generalized extreme value (GEV) distribution in a generalized additive model (GAM). The proposed model is known as generalized extreme value additive (GEVA) regression model, and a modified version of the local scoring algorithm is suggested to estimate it. We apply the proposed model to a dataset on Italian small and medium enterprises (SMEs) to estimate the default probability of SMEs. Our proposal performs better than the logistic (linear or additive) model in terms of predictive accuracy
Lingua originaleEnglish
pagine (da-a)230-239
Numero di pagine10
RivistaJournal of Forecasting
Volume34
Stato di pubblicazionePubblicato - 2015

Keywords

  • generalised extreme value distribution
  • generalized additive model
  • local scoring algorithm
  • rare event

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