Tian-Shyug Lee

CREDIT SCORING USING THE HYBRID NEURAL DISCRIMINANT TECHNIQUE

Abstract Credit scoring has become a very important task as the credit industry has been experiencing double-digit growth rate during the past few decades. The artificial neural network is becoming a very popular alternative in credit scoring models due to its associated memory characteristic and generalization capability. However, the decision of networks topology, importance of potential input variables and the long training process has often long been criticized and hence limited its application in handling credit scoring problems. The objective of the proposed study is to explore the performance of credit scoring by integrating the backpropagation neural networks with traditional discriminant analysis approach. To demonstrate the inclusion of the credit scoring result from discriminant analysis would simplify the network structure and improve the credit scoring accuracy of the designed neural network model, credit scoring tasks are performed on one bank credit card data set. As the results reveal, the proposed hybrid approach converges much faster than the conventional neural networks model. Moreover, the credit scoring accuracies increase in terms of the proposed methodology and outperform traditional discriminant analysis and logistic regression approaches.

A two-stage hybrid credit scoring model using artificial neural networks and multivariate adaptive regression splines

The objective of the proposed study is to explore the performance of credit scoring using a two-stage hybrid modeling procedure with artificial neural networks and multivariate adaptive regression splines (MARS). The rationale under the analyses is firstly to use MARS in building the credit scoring model, the obtained significant variables are then served as the input nodes of the neural networks model. To demonstrate the effectiveness and feasibility of the proposed modeling procedure, credit scoring tasks are performed on one bank housing loan dataset using cross-validation approach. As the results reveal, the proposed hybrid approach outperforms the results using discriminant analysis, logistic regression, artificial neural networks and MARS and hence provides an alternative in handling credit scoring tasks.

Financial time series forecasting using independent component analysis and support vector regression

As financial time series are inherently noisy and non-stationary, it is regarded as one of the most challenging applications of time series forecasting. Due to the advantages of generalization capability in obtaining a unique solution, support vector regression (SVR) has also been successfully applied in financial time series forecasting. In the modeling of financial time series using SVR, one of the key problems is the inherent high noise. Thus, detecting and removing the noise are important but difficult tasks when building an SVR forecasting model. To alleviate the influence of noise, a two-stage modeling approach using independent component analysis (ICA) and support vector regression is proposed in financial time series forecasting. ICA is a novel statistical signal processing technique that was originally proposed to find the latent source signals from observed mixture signals without having any prior knowledge of the mixing mechanism. The proposed approach first uses ICA to the forecasting variables for generating the independent components (ICs). After identifying and removing the ICs containing the noise, the rest of the ICs are then used to reconstruct the forecasting variables which contain less noise and served as the input variables of the SVR forecasting model. In order to evaluate the performance of the proposed approach, the Nikkei 225 opening index and TAIEX closing index are used as illustrative examples. Experimental results show that the proposed model outperforms the SVR model with non-filtered forecasting variables and a random walk model.

Mining the customer credit using classification and regression tree and multivariate adaptive regression splines

Credit scoring has become a very important task as the credit industry has been experiencing severe competition during the past few years. The artificial neural network is becoming a very popular alternative in credit scoring models due to its associated memory characteristic and generalization capability. However, the relative importance of potential input variables, long training process, and interpretative difficulties have often been criticized and hence limited its application in handling credit scoring problems. The objective of the proposed study is to explore the performance of credit scoring using two commonly discussed data mining techniques-classification and regression tree (CART) and multivariate adaptive regression splines (MARS). To demonstrate the effectiveness of credit scoring using CART and MARS, credit scoring tasks are performed on one bank credit card data set. As the results reveal, CART and MARS outperform traditional discriminant analysis, logistic regression, neural networks, and support vector machine (SVM) approaches in terms of credit scoring accuracy and hence provide efficient alternatives in implementing credit scoring tasks.

Mining the breast cancer pattern using artificial neural networks and multivariate adaptive regression splines

Data mining is a very popular technique and has been widely applied in different areas these days. The artificial neural network has become a very popular alternative in prediction and classification tasks due to its associated memory characteristics and generalization capability. However, the relative importance of potential input variables and the long training process have often been criticized and hence limited its application in handling classification problems. The objective of the proposed study is to explore the performance of data classification by integrating artificial neural networks with the multivariate adaptive regression splines (MARS) approach. The rationale under the analyses is firstly to use MARS in modeling the classification problem, then the obtained significant variables are used as the input variables of the designed neural networks model. To demonstrate the inclusion of the obtained important variables from MARS would improve the classification accuracy of the networks, diagnostic tasks are performed on one fine needle aspiration cytology breast cancer data set. As the results reveal, the proposed integrated approach outperforms the results using discriminant analysis, artificial neural networks and multivariate adaptive regression splines and hence provides an efficient alternative in handling breast cancer diagnostic problems.

Sales forecasting for computer wholesalers: A comparison of multivariate adaptive regression splines and artificial neural networks

Artificial neural networks (ANNs) have been found to be useful for sales/demand forecasting. However, one of the main shortcomings of ANNs is their inability to identify important forecasting variables. This study uses multivariate adaptive regression splines (MARS), a nonlinear and non-parametric regression methodology, to construct sales forecasting models for computer wholesalers. Through the outstanding variable screening ability of MARS, important sales forecasting variables for computer wholesalers can be obtained to enable them to make better sales management decisions. Two sets of real sales data collected from Taiwanese computer wholesalers are used to evaluate the performance of MARS. The experimental results show that the MARS model outperforms backpropagation neural networks, a support vector machine, a cerebellar model articulation controller neural network, an extreme learning machine, an ARIMA model, a multivariate linear regression model, and four two-stage forecasting schemes across various performance criteria. Moreover, the MARS forecasting results provide useful information about the relationships between the forecasting variables selected and sales amounts through the basis functions, important predictor variables, and the MARS prediction function obtained, and hence they have important implications for the implementation of appropriate sales decisions or strategies.

Investigating the information content of non-cash-trading index futures using neural networks

Abstract This study investigates the information content of SGX-DT Nikkei 225 and MSCI Taiwan index futures prices during the non-cash-trading (NCT) period. The lead–lag relationship between the futures market during the NCT period and the cash market during its opening period is first investigated by the generalized methods of moments. The obtained leading futures and previous days cash market closing index are then used as the input variables to predict the opening cash price index by the backpropagation neural network model. Sensitivity analysis is first employed to address and solve the issue of finding the appropriate setup of the topology of the networks. Extensive studies are then performed on the robustness of the constructed network by using different training and testing sample sizes. To demonstrate the effectiveness of our proposed method, the 5-min intraday data of spot and futures index from a 6-month historical record were evaluated using the designed neural network model. Analytic results demonstrate that the proposed neural network model outperforms the neural network model with previous days closing index as the input variable, the random walk and GARCH model forecasts. It, therefore, indicates that there is valuable information involved in the futures prices during the NCT period that can be used to forecast the opening cash price index. Besides, the neural network model provides better forecasting results than the commonly discussed GARCH model.

Mapping the intellectual structure of the Internet of Things (IoT) field (2000---2014): a co-word analysis

The study utilized co-word analysis to explore papers in the field of Internet of Things to examine the scientific development in the area. The research data were retrieved from the WOS database from the period between 2000 and 2014, which consists of 758 papers. By using co-word analysis, this study found 7 clusters that represent the intellectual structure of IoT, including ‘IoT and Security’, ‘Middleware’, ‘RFID’, ‘Internet’, ‘Cloud computing’, ‘Wireless sensor networks’ and ‘6LoWPAN’. To understand these intellectual structures, this study used a co-occurrence matrix based on Pearson’s correlation coefficient to create a clustering of the words using the hierarchical clustering technique. To visualize these intellectual structures, this study carried out a multidimensional scaling analysis, to which a PROXCAL algorithm was applied.

Stock index prediction: A comparison of MARS, BPN and SVR in an emerging market

Stock index prediction seems to be a challenging task of the financial time series prediction process especially in emerging markets with their complex and inefficient structures. Multivariate adaptive regression splines (MARS) is a nonlinear and non-parametric regression methodology and has been successfully used in classification tasks. However, there are few applications using MARS in stock index prediction. In this study, we compare the forecasting performance of MARS, backpropagation neural network (BPN), support vector regression (SVR), and multiple linear regression (MLR) models in Shanghai B-Share stock index. Experimental results show that MARS outperforms BPN, SVR and MLR in terms of prediction error and prediction accuracy.

A multi-stage control chart pattern recognition scheme based on independent component analysis and support vector machine

Recognition of unnatural control chart patterns (CCPs) is an important issue because the unnatural CCPs can be associated with specific assignable causes negatively affecting the manufacturing process. By assuming that an unnatural CCP is a combination of normal pattern and process disturbance, a multi-stage control chart pattern recognition scheme which integrates independent component analysis (ICA) and support vector machine (SVM) is proposed in this study. The proposed multi-stage ICA-SVM scheme first uses ICA to extract independent components (ICs) from the monitoring process data containing CCPs. The normal pattern and process disturbance hidden in the process data can be discovered in the ICs. Then, the IC representing the process disturbance can be identified. Finally, the identified IC and the data of the monitoring process are used as input variables to develop three different SVM models for CCP recognition. The simulation results show that the proposed multi-stage ICA-SVM scheme not only produces accurate and stable recognition results but also has better classification accuracy than four competing models.