You-Shyang Chen

Classifying the segmentation of customer value via RFM model and RS theory

Data mining is a powerful new technique to help companies mining the patterns and trends in their customers data, then to drive improved customer relationships, and it is one of well-known tools given to customer relationship management (CRM). However, there are some drawbacks for data mining tool, such as neural networks has long training times and genetic algorithm is brute computing method. This study proposes a new procedure, joining quantitative value of RFM attributes and K-means algorithm into rough set theory (RS theory), to extract meaning rules, and it can effectively improve these drawbacks. Three purposes involved in this study in the following: (1) discretize continuous attributes to enhance the rough sets algorithm; (2) cluster customer value as output (customer loyalty) that is partitioned into 3, 5 and 7 classes based on subjective view, then see which class is the best in accuracy rate; and (3) find out the characteristic of customer in order to strengthen CRM. A practical collected C-company dataset in Taiwans electronic industry is employed in empirical case study to illustrate the proposed procedure. Referring to [Hughes, A. M. (1994). Strategic database marketing. Chicago: Probus Publishing Company], this study firstly utilizes RFM model to yield quantitative value as input attributes; next, uses K-means algorithm to cluster customer value; finally, employs rough sets (the LEM2 algorithm) to mine classification rules that help enterprises driving an excellent CRM. In analysis of the empirical results, the proposed procedure outperforms the methods listed in terms of accuracy rate regardless of 3, 5 and 7 classes on output, and generates understandable decision rules.

Hybrid models based on rough set classifiers for setting credit rating decision rules in the global banking industry

Banks are important to national, and even global, economic stability. Banking panics that follow bank insolvency or bankruptcy, especially of large banks, can severely jeopardize economic stability. Therefore, issuers and investors urgently need a credit rating indicator to help identify the financial status and operational competence of banks. A credit rating provides financial entities with an assessment of credit worthiness, investment risk, and default probability. Although numerous models have been proposed to solve credit rating problems, they have the following drawbacks: (1) lack of explanatory power; (2) reliance on the restrictive assumptions of statistical techniques; and (3) numerous variables, which result in multiple dimensions and complex data. To overcome these shortcomings, this work applies two hybrid models that solve the practical problems in credit rating classification. For model verification, this work uses an experimental dataset collected from the Bankscope database for the period 1998-2007. Experimental results demonstrate that the proposed hybrid models for credit rating classification outperform the listing models in this work. A set of decision rules for classifying credit ratings is extracted. Finally, study findings and managerial implications are provided for academics and practitioners.

Forecasting innovation diffusion of products using trend-weighted fuzzy time-series model

The time-series models have been used to make reasonably accurate predictions in weather forecasting, academic enrolment, stock price, etc. This study proposes a novel method that incorporates trend-weighting into the fuzzy time-series models advanced by Chens and Yus method to explore the extent to which the innovation diffusion of ICT products could be adequately described by the proposed procedure. To verify the proposed procedure, the actual DSL (digital subscriber line) data in Taiwan is illustrated, and this study evaluates the accuracy of the proposed procedure by comparing with different innovation diffusion models: Bass model, Logistic model and Dynamic model. The results show that the proposed procedure surpasses the methods listed in terms of accuracy and SSE (Sum of Squares Error).

Fusion ANFIS models based on multi-stock volatility causality for TAIEX forecasting

Stock market investors value accurate forecasting of future stock price from trading systems because of the potential for large profits. Thus, investors use different forecasting models, such as the time-series model, to assemble a superior investment portfolio. Unfortunately, there are three major drawbacks to the time-series model: (1) most statistical methods rely on some assumptions about the variables; (2) most conventional time-series models use only one variable in forecasting; and (3) the rules mined from artificial neural networks are not easily understandable. To address these shortcomings, this study proposes a new model based on multi-stock volatility causality, a fusion adaptive-network-based fuzzy inference system (ANFIS) procedure, for forecasting stock price problems in Taiwan. Furthermore, to illustrate the proposed model, three practical, collected stock index datasets from the USA and Taiwan stock markets are used in the empirical experiment. The experimental results indicate that the proposed model is superior to the listing methods in terms of root mean squared error, and further evaluation reveals that the profits comparison results for the proposed model produce higher profits than the listing models.

A soft-computing based rough sets classifier for classifying IPO returns in the financial markets

In the financial markets, due to limitations of the noise caused continuously by changing market conditions and environments, and a subjective sentiment or other factors unrelated to expected returns on investment decision-making of investors, there is a growing consensus designing and employing a variety of soft computing systems to remedy the aforementioned existing problems objectively and intelligently. Previously, many researchers have long used statistical methods for handling the related problems of investment markets. However, these conventional methods become more complex when relationships in the input/output dataset are nonlinear. Nevertheless, statistical techniques always rely on the assumptions on linear separability, multivariate normality, and independence of the predictive variables; unfortunately, many of the common models of treating the financial markets problems violate these assumptions. Therefore, to reconcile the existing shortcomings, this study offers three hybrid models based on a rough sets classifier to extract decision rules and aid making investment decision for the market investors. The proposed hybrid models include three differently integrated models for solving IPO (Initial Public Offerings) returns problems of the financial markets: (1) Experiential Knowledge (EK)+Feature Selection Method (FSM)+Minimize Entropy Principle Approach (MEPA)+Rough Set Theory (RST)+Rule Filter (RF), (2) EK+Decision Trees (DT)-C4.5+RST+RF, and (3) EK+FSM+RST+RF. The proposed hybrid models are illustrated by examining an IPO dataset for publicly traded firms. The experimental results indicate that the proposed hybrid models outperform the listing methods in accuracy, number of attributes, standard deviation, and number of rules. Furthermore, the proposed hybrid models generate comprehensible rules readily applied in knowledge-based systems for investors. Meaningfully, the study findings and implications are of value to both academicians and practitioners.

Extracting performance rules of suppliers in the manufacturing industry: an empirical study

Performance evaluation of suppliers is increasingly recognized as a critical indicator in supply chain cooperation. Traditional performance evaluation methods have the problems of a simple buy/sell relation and in one’s subjective views between manufacturers and suppliers, and they lack objective automatic evaluation processes in the supply chain considered. Statistical techniques used for evaluation rely on the restrictive assumptions of linear separability, multivariate normality, and independence of the predictive variables. Unfortunately, many of the common models of performance evaluation of suppliers violate these assumptions. The study proposes an integrated model by combining K-means clustering, feature selection, and the decision tree method into a single evaluation model to assess the performance of suppliers and simultaneously tackles the above-mentioned shortcomings. The integrated model is illustrated with an empirical case study of a manufacturer for an original design manufacturer (ODM) to demonstrate the model performance. The experimental results indicate that the proposed method outperforms listed methods in terms of accuracy, and three redundant attributes can be eliminated from the empirical case. Furthermore, the extracted rules by the decision tree C4.5 algorithm form an automatic knowledge system for supplier performance evaluation.

Identifying patients in target customer segments using a two-stage clustering-classification approach

Identifying patients in a Target Customer Segment (TCS) is important to determine the demand for, and to appropriately allocate resources for, health care services. The purpose of this study is to propose a two-stage clustering-classification model through (1) initially integrating the RFM attribute and K-means algorithm for clustering the TCS patients and (2) then integrating the global discretization method and the rough set theory for classifying hospitalized departments and optimizing health care services. To assess the performance of the proposed model, a dataset was used from a representative hospital (termed Hospital-A) that was extracted from a database from an empirical study in Taiwan comprised of 183,947 samples that were characterized by 44 attributes during 2008. The proposed model was compared with three techniques, Decision Tree, Naive Bayes, and Multilayer Perceptron, and the empirical results showed significant promise of its accuracy. The generated knowledge-based rules provide useful information to maximize resource utilization and support the development of a strategy for decision-making in hospitals. From the findings, 75 patients in the TCS, three hospital departments, and specific diagnostic items were discovered in the data for Hospital-A. A potential determinant for gender differences was found, and the age attribute was not significant to the hospital departments.

Modeling fitting-function-based fuzzy time series patterns for evolving stock index forecasting

Fuzzy time series models that have been developed have been widely applied to many applications of forecasting future stock prices or weighted indexes in the financial field. Three interesting problems have been identified in relation to the associated time series methods, as follows: (1) conventional time series models that consider single variables on associated problems only, (2) fuzzy time series models that determine the interval length of the linguistic values subjectively, and (3) selected variables that depend on personal experience and opinion subjectively. In light of the above limitations, this study constitutes a hybrid seven-step procedure that proposes three integrated fuzzy time series models that are based on fitting functions to forecast weighted indexes of the stock market. First, the proposed models employ Pearson correlation coefficients to objectively select important technical indicators. Second, this study utilizes an objective algorithm to determine the lower bound and upper bound of the universe of discourse automatically. Third, the proposed models use the spread-partition algorithm to automatically determine linguistic intervals. Finally, they combine the transformed variables to build three fuzzy time series models using the criterion of the minimal root mean square error (RMSE). Furthermore, this study provides all of the necessary justifying information for using a linear process to select the inputs for the given non-linear data. To further evaluate the performance of the proposed models, the transaction records of TAIEX (Taiwan Stock Exchange Capitalization Weighted Stock Index) and HSI (Hang Seng Indexes) from 1998/01/03 to 2006/12/31 are used to illustrate the methodology with two experimental data sets. Chen’s (Fuzzy Sets Syst. 81:311–319, 1996) model, Yu’s (Physica A 349:609–624, 2005) model, support vector regression (SVR), and partial least square regression (PLSR) are used as models to be compared with the proposed model when given the same data sets. The analytical results show that the proposed models outperform the listed models under the evaluation criteria of the RMSE (in contrast to the forecasting accuracy) for forecasting a weighted stock index in both the Taiwan and Hong Kong stock markets.

Forecasting PGR of the financial industry using a rough sets classifier based on attribute-granularity

In the financial industry, continually changing economic conditions and characteristics involving uncertainty and risk have made financial forecasts even more difficult, increasing the need for more reliable ways to forecast a bank’s operating performance. However, early related studies of performance analysis for using statistical methods usually become more complex when relationships in input/output data are nonlinear. Furthermore, strict data assumptions, such as linearity, normality, and independence, limit real-world applications often. Additionally, a drawback of traditional rough sets is that data must be discretized first for improving classification accuracy. To remedy the existing shortcomings above, the study proposes a hybrid procedure, which mixes professional knowledge, an attribute granularity, and a rough sets classifier, for automatically classifying profit growth rate (PGR) to solve real problems faced by investors. The proposed procedure is illustrated by examining a practical dataset for publicly traded financial holding stocks in Taiwan‘s stock markets. The experimental results reveal that the proposed procedure outperforms listing methods in terms of accuracy, and they provide useful insights in responsiveness to rapidly changing stock market conditions. Importantly, the output created by the rough sets LEM2 (Learning from Examples Module, version 2) algorithm is a set of comprehensible rules applied in a knowledge-based investment system for investors.

Application of rough set classifiers for determining hemodialysis adequacy in ESRD patients

The incidence and the prevalence of end-stage renal disease (ESRD) in Taiwan are the highest in the world. Therefore, hemodialysis (HD) therapy is a major concern and an important challenge due to the shortage of donated organs for transplantation. Previous researchers developed various forecasting models based on statistical methods and artificial intelligence techniques to address the real-world problems of HD therapy that are faced by ESRD patients and their doctors in the healthcare services. Because the performance of these forecasting models is highly dependent on the context and the data used, it would be valuable to develop more suitable methods for applications in this field. This study presents an integrated procedure that is based on rough set classifiers and aims to provide an alternate method for predicting the urea reduction ratio for assessing HD adequacy for ESRD patients and their doctors. The proposed procedure is illustrated in practice by examining a dataset from a specific medical center in Taiwan. The experimental results reveal that the proposed procedure has better accuracy with a low standard deviation than the listed methods. The output created by the rough set LEM2 algorithm is a comprehensible decision rule set that can be applied in knowledge-based healthcare services as desired. The analytical results provide useful information for both academics and practitioners.