Neural and wavelet network models for financial distress classification

This work analyzes the use of linear discriminant models, multi-layer perceptron neural networks and wavelet networks for corporate financial distress prediction. Although simple and easy to interpret, linear models require statistical assumptions that may be unrealistic. Neural networks are able to discriminate patterns that are not linearly separable, but the large number of parameters involved in a neural model often causes generalization problems. Wavelet networks are classification models that implement nonlinear discriminant surfaces as the superposition of dilated and translated versions of a single "mother wavelet" function. In this paper, an algorithm is proposed to select dilation and translation parameters that yield a wavelet network classifier with good parsimony characteristics. The models are compared in a case study involving failed and continuing British firms in the period 1997-2000. Problems associated with over-parameterized neural networks are illustrated and the Optimal Brain Damage pruning technique is employed to obtain a parsimonious neural model. The results, supported by a re-sampling study, show that both neural and wavelet networks may be a valid alternative to classical linear discriminant models.

Required returns for real estate in UK pension fund portfolios

The position of Real Estate within a multi-asset portfolio has received considerable attention recently. Previous research has concentrated on the percentage holding property would achieve given its risk/return characteristics. Such studies have invariably used Modern Portfolio Theory and these approaches have been criticised for both the quality of the real estate data and problems with the methodology itself. The first problem is now well understood, and the second can be addressed by the use of realistic constraints on asset holdings. This paper takes a different approach. We determine the level of return that Real Estate needs to achieve to justify an allocation within the multi asset portfolio. In order to test the importance of the quality of the data we use historic appraisal based and desmoothed returns to examine the sensitivity of the results. Consideration is also given to the Holding period and the imposition of realistic constraints on the asset holdings in order to model portfolios held by pension fund investors. We conclude, using several benchmark levels of portfolio risk and return, that using appraisal based data the required level of return for Real Estate was less than that achieved over the period 1972-1993. The use of desmoothed series can reverse this result at the highest levels of desmoothing although within a restricted holding period Real Estate offered returns in excess of those required to enter the portfolio and might have a role to play in the multi-asset portfolio.

Parkinsonian tremor identification with multiple local field potential feature classification

This paper explores the development of multi-feature classification techniques used to identify tremor-related characteristics in the Parkinsonian patient. Local field potentials were recorded from the subthalamic nucleus and the globus pallidus internus of eight Parkinsonian patients through the implanted electrodes of a Deep brain stimulation (DBS) device prior to device internalization. A range of signal processing techniques were evaluated with respect to their tremor detection capability and used as inputs in a multi-feature neural network classifier to identify the activity of Parkinsonian tremor. The results of this study show that a trained multi-feature neural network is able, under certain conditions, to achieve excellent detection accuracy on patients unseen during training. Overall the tremor detection accuracy was mixed, although an accuracy of over 86% was achieved in four out of the eight patients.

Construction of neurofuzzy models for imbalanced data classification

We propose a new class of neurofuzzy construction algorithms with the aim of maximizing generalization capability specifically for imbalanced data classification problems based on leave-one-out (LOO) cross validation. The algorithms are in two stages, first an initial rule base is constructed based on estimating the Gaussian mixture model with analysis of variance decomposition from input data; the second stage carries out the joint weighted least squares parameter estimation and rule selection using orthogonal forward subspace selection (OFSS)procedure. We show how different LOO based rule selection criteria can be incorporated with OFSS, and advocate either maximizing the leave-one-out area under curve of the receiver operating characteristics, or maximizing the leave-one-out Fmeasure if the data sets exhibit imbalanced class distribution. Extensive comparative simulations illustrate the effectiveness of the proposed algorithms.

Therapist characteristics and their effect on training outcomes: what counts?

Background: Evidence exists for a relationship between individual characteristics and both job and training performance; however relationships may not be generalizable. Little is known about the impact of therapist characteristics on performance in postgraduate therapist training programmes. Aims: The aim of this study was to investigate associations between the grades of trainee Low-Intensity and High-Intensity cognitive behavioural therapists and individual characteristics. Method: Trainee Low-Intensity (n=81) and High-Intensity (n=59) therapists completed measures of personality and cognitive ability; demographic and course grade data for participants were collected. Results: Degree classification emerged as the only variable to be significantly associated with performance across assessments and courses. Higher undergraduate degree classifications were associated with superior academic and clinical performance. Agreeableness was the only dimension of personality to be associated (positively) with clinical skill. Age was weakly and negatively associated with performance. Conclusions: Relationships between individual characteristics and training outcomes are complex and may be context specific. These results could have important implications for the selection and development of therapists for Low or High-Intensity cognitive behavioural therapy (CBT) training.