A Study of Panel Logit Model and Adaptive Neuro-Fuzzy Inference System in the Prediction of Financial Distress Periods

Abstract:     
The purpose of this paper is to present two different approaches of financial distress pre-warning models appropriate for risk supervisors, investors and policy makers. We examine a sample of the financial institutions and electronic companies of Taiwan Security Exchange (TSE) market from 2002 through 2008. We present a binary logistic regression with paned data analysis. With the pooled binary logistic regression we build a model including more variables in the regression than with random effects, while the in-sample and out-sample forecasting performance is higher in random effects estimation than in pooled regression. On the other hand we estimate an Adaptive Neuro-Fuzzy Inference System (ANFIS) with Gaussian and Generalized Bell (Gbell) functions and we find that ANFIS outperforms significant Logit regressions in both in-sample and out-of-sample periods, indicating that ANFIS is a more appropriate tool for financial risk managers and for the economic policy makers in central banks and national statistical services.

Number of Pages in PDF File: 7

Keywords: ANFIS, Binary Logistic Regression, Financial Distress, Panel Data

JEL Classification: C33, C35, C45, C53, C63

Accepted Paper Series