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Variable precision rough set theory and data discretisation: an application to corporate failure prediction

Beynon, Malcolm James ORCID: and Peel, Michael John ORCID: 2001. Variable precision rough set theory and data discretisation: an application to corporate failure prediction. Omega 29 (6) , pp. 561-576. 10.1016/S0305-0483(01)00045-7

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Since the seminal work of Pawlak (International Journal of Information and Computer Science, 11 (1982) 341-356) rough set theory (RST) has evolved into a rule-based decision-making technique. To date, however, relatively little empirical research has been conducted on the efficacy of the rough set approach in the context of business and finance applications. This paper extends previous research by employing a development of RST, namely the variable precision rough sets (VPRS) model, in an experiment to predict between failed and non-failed UK companies. It also utilizes the FUSINTER discretisation method which neglates the influence of an 'expert' opinion. The results of the VPRS analysis are compared to those generated by the classical logit and multivariate discriminant analysis, together with more closely related non-parametric decision tree methods. It is concluded that VPRS is a promising addition to existing methods in that it is a practical tool, which generates explicit probabilistic rules from a given information system, with the rules offering the decision maker informative insights into classification problems.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Uncontrolled Keywords: Data mining; Failure prediction; FUSINTER data discretisation; Rough set theory; Variable precision rough set theory
Publisher: Elsevier
ISSN: 0305-0483
Last Modified: 01 Dec 2022 10:50

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