The integrated methodology of rough set theory and artificial neural network for business failure prediction

This paper proposes a hybrid intelligent system that predicts the failure of firms based on the past financial performance data, combining rough set approach and neural network. We can get reduced information table, which implies that the number of evaluation criteria such as financial ratios and qualitative variables is reduced with no information loss through rough set approach. And then, this reduced information is used to develop classification rules and train neural network to infer appropriate parameters. The rules developed by rough set analysis show the best prediction accuracy if a case does match any of the rules. The rationale of our hybrid system is using rules developed by rough sets for an object that matches any of the rules and neural network for one that does not match any of them. The effectiveness of our methodology was verified by experiments comparing traditional discriminant analysis and neural network approach with our hybrid approach. For the experiment, the financial data of 2400 Korean firms during the period 1994–1997 were selected, and for the validation, k-fold validation was used.     

A Hybrid Detecting Fraudulent Financial Statements Model Using Rough Set Theory and Support Vector Machines

The detection of fraudulent financial statements (FFS) is an important and challenging issue that has served as the impetus for many academic studies over the past three decades. Although nonfinancial ratios are generally acknowledged as the key factor contributing to the FFS of a corporation, they are usually excluded from early detection models. The objective of this study is to increase the accuracy of FFS detection by integrating the rough set theory (RST) and support vector machines (SVM) approaches, while adopting both financial and nonfinancial ratios as predictive variables. The results showed that the proposed hybrid approach (RST+SVM) has the best classification rate as well as the lowest occurrence of Types I and II errors, and that nonfinancial ratios are indeed valuable information in FFS detection.     

基于邻域距离ISOMAP算法的高光谱遥感降维算法

提出一种以邻域距离改进ISOMAP的算法(Neighborhood Distance ISOMAP,ND\|ISOMAP),该方法采用邻域距离逐步逼近流形距离来表达高维数据的流形结构。同时针对ISOMAP算法的计算复杂度高、运算时间长的特点,提出了一种基于矩阵分块和自动调图的ISOMAP算法(Block\|matrix and Auto\|color ISOMAP,BA\|ISOMAP)以提高运算速率。通过对高光谱遥感影像进行分类比较算法优劣性,基于邻域距离的ISOMAP算法较原始的ISOMAP算法降维效果有了较大的提升,最高分类精度达到97.36%,而原始的ISOMAP算法仅能达到75.01%的分类精度,而基于矩阵分块与自动调图ISOMAP与邻域距离相结合降维后精度达到89.61%,但是其计算速率得到了较大提升,为原始ISOMAP算法的近40倍。     

Bankruptcy prediction using SVM models with a new approach to combine features selection and parameter optimisation

Due to the economic significance of bankruptcy prediction of companies for financial institutions, investors and governments, many quantitative methods have been used to develop effective prediction models. Support vector machine (SVM), a powerful classification method, has been used for this task; however, the performance of SVM is sensitive to model form, parameter setting and features selection. In this study, a new approach based on direct search and features ranking technology is proposed to optimise features selection and parameter setting for 1-norm and least-squares SVM models for bankruptcy prediction. This approach is also compared to the SVM models with parameter optimisation and features selection by the popular genetic algorithm technique. The experimental results on a data set with 2010 instances show that the proposed models are good alternatives for bankruptcy prediction.     

Predicting business failure using support vector machines with straightforward wrapper: A re-sampling study

Business failure prediction (BFP) is an effective tool to help financial institutions and relevant people to make the right decision in investments, especially in the current competitive environment. This topic belongs to a classification-type task, one of whose aims is to generate more accurate hit ratios. Support vector machine (SVM) is a statistical learning technique, whose advantage is its high generalization performance. The objective of this context is threefold. Firstly, SVM is used to predict business failure by utilizing a straightforward wrapper approach to help the model produce more accurate prediction. The wrapper approach is fulfilled by employing a forward feature selection method, composed of feature ranking and feature selection. Meanwhile, this work attempts to investigate the feasibility of using linear SVMs to select features for all SVMs in the wrapper since non-linear SVMs yield to over-fit the data. Finally, a robust re-sampling approach is used to evaluate model performances for the task of BFP in China. In the empirical research, performances of linear SVM, polynomial SVM, Gaussian SVM, and sigmoid SVM with the best filter of stepwise MDA, and wrappers respectively using linear SVM and non-linear SVMs as evaluating functions are to be compared. The results indicate that the non-linear SVM with radial basis function kernel and features selected by linear SVM compare significantly superiorly to all the other SVMs. Meanwhile, all SVMs with features selected by linear SVM produce at least as good performances as SVMs with other optimal features.     

基于IPSO-Powell优化SVM的煤与瓦斯突出预测算法

针对基于支持向量机(SVM)的煤与瓦斯突出预测算法存在预测精度和可靠性不高,选择核函数时未考虑非线性数据的分类,对非线性分布的煤与瓦斯突出影响因素提取效果较差的问题,提出了一种将改进的粒子群(IPSO)算法与Powell算法相结合(IPSO-Powell)优化SVM的煤与瓦斯突出预测算法.首先通过灰色关联分析提取出煤与瓦斯突出主控因素,即瓦斯放散初速度、瓦斯压力、开采深度、瓦斯含量和煤体破坏类型,作为算法的输入样本;然后运用IPSO算法改善粒子群算法(PSO)的早熟收敛性,结合Powell算法进行局部搜索得到最优解,对SVM算法的惩罚系数和高斯核函数参数进行寻优,得到SVM的最优参数组合;最后将煤与瓦斯突出的主控因素输入到SVM中进行分类,并将其与实际测试集分类结果进行对比,实现煤与瓦斯突出预测.仿真结果表明:与SVM算法、GA-SVM算法、PSO-SVM算法相比,利用IPSO-Powell优化SVM算法进行煤与瓦斯突出预测,具有更高的预测精度,同时提高了SVM求解过程的运算效率,能同时满足煤与瓦斯突出预测的精度和可靠性要求,准确率达到95.9%.     

Software fault prediction using particle swarm algorithm with genetic algorithm and support vector machine classifier

Software fault prediction is a process of developing modules that are used by developers in order to help them to detect faulty classes or faulty modules in early phases of the development life cycle and to determine the modules that need more refactoring in the maintenance phase. Software reliability means the probability of failure has occurred during a period of time, so when we describe a system as not reliable, it means that it contains many errors, and these errors can be accepted in some systems, but it may lead to crucial problems in critical systems like aircraft, space shuttle, and medical systems. Therefore, locating faulty software modules is an essential step because it helps defining the modules that need more refactoring or more testing. In this article, an approach is developed by integrating genetics algorithm (GA) with support vector machine (SVM) classifier and particle swarm algorithm for software fault prediction as a stand though for better software fault prediction technique. The developed approach is applied into 24 datasets (12-NASA MDP and 12-Java open-source projects), where NASA MDP is considered as a large-scale dataset and Java open-source projects are considered as a small-scale dataset. Results indicate that integrating GA with SVM and particle swarm algorithm improves the performance of the software fault prediction process when it is applied into large-scale and small-scale datasets and overcome the limitations in the previous studies.     

Forecasting financial time series using a methodology based on autoregressive integrated moving average and Taylor expansion

Financial time series prediction is regarded as one of the most challenging job because of its inherent complexity, and the hybrid forecasting model incorporating autoregressive integrated moving average and support vector machine (SVM) has been implemented widely to deal with the both linear and nonlinear patterns in time series data. However, the SVM model does not take into consideration the time correlation knowledge between different data points in time series, which impacts the learning efficiency of the SVM in real application. To overcome this restriction, this paper proposes the Taylor Expansion Forecasting model as an alternative to the SVM and develops a novel hybrid methodology via combining autoregressive integrated moving average and Taylor Expansion Forecasting to exploit the comprehensive forecasting capacity to the financial time series data with noise. Both theoretical proof and empirical results obtained on several commodity future prices demonstrate that the proposed hybrid model improves greatly the forecasting accuracy.     

A new perspective of performance comparison among machine learning algorithms for financial distress prediction

We set out in this study to review a vast amount of recent literature on machine learning (ML) approaches to predicting financial distress (FD), including supervised, unsupervised and hybrid supervised–unsupervised learning algorithms. Four supervised ML models including the traditional support vector machine (SVM), recently developed hybrid associative memory with translation (HACT), hybrid GA-fuzzy clustering and extreme gradient boosting (XGBoost) were compared in prediction performance to the unsupervised classifier deep belief network (DBN) and the hybrid DBN-SVM model, whereby a total of sixteen financial variables were selected from the financial statements of the publicly-listed Taiwanese firms as inputs to the six approaches. Our empirical findings, covering the 2010–2016 sample period, demonstrated that among the four supervised algorithms, the XGBoost provided the most accurate FD prediction. Moreover, the hybrid DBN-SVM model was able to generate more accurate forecasts than the use of either the SVM or the classifier DBN in isolation.     

基于ABC-PSO的ε-SVM在甲烷测量中的应用

针对红外甲烷传感器在工业现场测量时易受到温度、湿度以及类似气体等非目标变量的影响,提出了一种基于人工蜂群和粒子群混合优化算法(ABC-PSO)的支持向量机模型(ABC-PSO-ε-SVM)对其进行校正.将ABC算法与PSO算法并行组合构成混合优化算法,能够感知非目标变量的变化,快速、准确地搜索到SVM参数.实验中,采用红外甲烷传感器对0％～5.05％浓度的16组标准甲烷气体进行测量,将其中11组数据作为训练集,5组数据作为测试集,建立e-SVM回归校正模型并进行预测.结果表明:模型的回归拟合效果好,预测精度比单一优化算法的SVM模型高.     

平滑削边绝对偏离惩罚截断Hinge损失支持向量机的财务危机预报

针对传统支持向量机(SVM)分类存在对离群点敏感、支持向量(SV)个数多和分类面参数非稀疏的问题,提出了平滑削边绝对偏离(SCAD)惩罚截断Hinge损失SVM(SCAD-TSVM)算法,并将其用于构建财务预警模型,同时就该模型的求解设计了一个迭代更新算法。结合沪深股市A股制造业上市公司的财务数据进行实证分析,同时对比L1范数惩罚SVM、SCAD惩罚SVM和截断Hinge损失SVM(TSVM)构建的T-2和T-3模型,结果发现SCAD-TSVM构建的T-2和T-3模型都具有最好的稀疏性和最高的预报精度,而且其在不同训练样本数上的平均预测准确率都要比L1范数SVM(L1-SVM)、SCAD-SVM和TSVM算法的高。     

Forecasting financial condition of Chinese listed companies based on support vector machine

Due to the radical changing and specialty of Chinese capital market, it is challenging to develop a powerful financial distress prediction model. In this paper, we first analyzed the feasibility of Chinese special-treated companies as distressed sample by using statistical methods. Then we developed a prediction model based on support vector machines (SVM) for an unmatched sample of Chinese high-tech manufacture companies. The grid-search technique using 10-fold cross-validation is used to find out the best parameter value of kernel function of SVM. The experiment results show that the proposed SVM model outperforms conventional statistical methods and back-propagation neural network. In general, SVM provides a robust model with high prediction accuracy for forecasting financial distress of Chinese listed companies. It is also suggested that Chinese special-treated event adopted as cut-off line has some effect on the prediction accuracy of the models.     

A support vector machine based MSM model for financial short-term volatility forecasting

Financial time series forecasting has become a challenge because of its long-memory, thick tails and volatility persistence. Multifractal process has recently been proposed as a new formalism for this problem. An iterative Markov-Switching Multifractal (MSM) model was introduced to the literature. It is able to capture many of the important stylized features of the financial time series, including long-memory in volatility, volatility clustering, and return outliers. The model delivers stronger performance both in- and out-of-sample than GARCH-type models in long-term forecasts. To enhance MSM’s short-term prediction accuracy, this paper proposes a support vector machine (SVM) based MSM approach which exploits MSM model to forecast volatility and SVM to model the innovations. To verify the effectiveness of the proposed approach, two stock indexes in the Chinese A-share market are chosen as the forecasting targets. Comparing with some existing state-of-the-art models, the proposed approach gives superior results. It indicates that the proposed model provides a promising alternative to financial short-term volatility prediction.     

Data depth based support vector machines for predicting corporate bankruptcy

In financial distress analysis, the diagnosis of firms at risk for bankruptcy is crucial in preparing to hedge against any financial damage the at-risk firms stand to inflict. Some pre-alarm signals that indicate a potential financial crisis exist when a firm faces a default risk. Early studies on corporate bankruptcy prediction include parametric and nonparametric approaches, such as artificial intelligence (AI), for detecting pre-alarm signals. Among nonparametric techniques, the methods involving support vector machine (SVM) have shown potential in predicting corporate bankruptcy. We propose a hybrid method that combines data depths and nonlinear SVM for the prediction of corporate bankruptcy. We employed data depth functions to condense multivariate financial data with nonlinear and non-normal characteristics into one-dimensional space. The SVM method was introduced to classify the data points on a depth versus depth plot (DD-plot). Based on data set that records failed and non-failed manufacturing firms in Korea over 10 years, the empirical results demonstrated that the proposed method offers a higher level of accuracy in corporate bankruptcy prediction than existing methods. The proposed method is expected to provide a guidance in corporate investing for investors or other interested parties.     

Prediction of corporate financial distress: an application of the America banking industry

Financial distress prediction is an important and widely researched issue because of its potential significant influence on bank lending decisions and profitability. Since the 1970s, many mathematical and statistical researchers have proposed prediction models on such issues. Given the recent vigorous growth of artificial intelligence (AI) and data mining techniques, many researchers have begun to apply those techniques to the problem of bankruptcy prediction. Among these techniques, the support vector machine (SVM) has been applied successfully and obtained good performance with other AI and statistical method comparisons. Particle swarm optimization (PSO) has been increasingly employed in conjunction with AI techniques and has provided reliable optimization capability. However, researches addressing PSO and SVM integration are scarce, although there is great potential for useful applications in this field. This paper proposes an adaptive inertia weight (AIW) method for improving PSO performance and integrates SVM in two aspects: feature subset selection and parameter optimization. The experiments collected 54 listed companies as initial samples from American bank datasets. The proposed adaptive PSO-SVM approach could be a more suitable methodology for predicting potential financial distress. This approach also proves its capability to handle scalable and non-scalable function problems.     

Optimizing parameters of support vector machine using fast messy genetic algorithm for dispute classification

Hybrid system is a potential tool to deal with construction engineering and management problems. This study proposes an optimized hybrid artificial intelligence model to integrate a fast messy genetic algorithm (fmGA) with a support vector machine (SVM). The fmGA-based SVM (GASVM) is used for early prediction of dispute propensity in the initial phase of public–private partnership projects. Particularly, the SVM mainly provides learning and curve fitting while the fmGA optimizes SVM parameters. Measures in term of accuracy, precision, sensitivity, specificity, and area under the curve and synthesis index are used for performance evaluation of proposed hybrid intelligence classification model. Experimental comparisons indicate that GASVM achieves better cross-fold prediction accuracy compared to other baseline models (i.e., CART, CHAID, QUEST, and C5.0) and previous works. The forecasting results provide the proactive-warning and decision-support information needed to manage potential disputes.     

Feature selection for support vector machine in financial crisis prediction: a case study in China

Abstract: Corporate financial crisis forecasting plays an increasingly important role in the current intense and competitive commercial environment. It is an important phase in financial crisis forecasting to find the features that discriminate different financial conditions. In this paper, a genetic algorithm (GA) based approach and statistical filter approaches are applied to identify the best features for the support vector machine (SVM). The proposed GA‐based approach is carefully designed in order to have the capability of simultaneously optimizing the features and parameters of the SVM. Experimental results on the data from Chinese companies show that the GA‐based approach can extract fewer features with a higher accuracy compared with statistical filter approaches, such as analysis of variance, the T‐W test (which is the t test applied to variables satisfying a normal distribution and the Wilcoxon test applied to other variables not satisfying a normal distribution), logit regression and multiple discriminant analysis. Moreover, the experiments indicate that the proposed GA‐based approach is robust and suitable for selecting features for the SVM.     

Approximating support vector machine with artificial neural network for fast prediction

Support vector machine (SVM) is a powerful algorithm for classification and regression problems and is widely applied to real-world applications. However, its high computational load in the test phase makes it difficult to use in practice. In this paper, we propose hybrid neural network (HNN), a method to accelerate an SVM in the test phase by approximating the SVM. The proposed method approximates the SVM using an artificial neural network (ANN). The resulting regression function of the ANN replaces the decision function or the regression function of the SVM. Since the prediction of the ANN requires significantly less computation than that of the SVM, the proposed method yields faster test speed. The proposed method is evaluated by experiments on real-world benchmark datasets. Experimental results show that the proposed method successfully accelerates SVM in the test phase with little or no prediction loss.     

Hybrid of simulated annealing and SVM for hydraulic valve characteristics prediction

Accurate prediction for the synthesis characteristics of hydraulic valve in industrial production plays an important role in decreasing the repair rate and the reject rate of the product. Recently, Support Vector Machine (SVM) as a highly effective mean of system modeling has been widely used for predicting. However, the important problem is how to choose the reasonable input parameters for SVM. In this paper, a hybrid prediction method (SA–SVM for short) is proposed by using simulated annealing (SA) and SVM to predict synthesis characteristics of the hydraulic valve, where SA is used to optimize the input parameters of SVM based prediction model. To validate the proposed prediction method, a specific hydraulic valve production is selected as a case study. The prediction results show that the proposed prediction method is applicable to forecast the synthesis characteristics of hydraulic valve and with higher accuracy. Comparing with Adaptive Neuro-Fuzzy Inference System (ANFIS) and Artificial Neural Networks (ANN) are also made.     

Patent classification system using a new hybrid genetic algorithm support vector machine

Nowadays, decision-making activities of knowledge-intensive enterprises depend heavily on the successful classification of patents. A considerable amount of time is required to achieve successful classification because of the complexity associated with patent information and of the large number of potential patents. Several different patent classification approaches have been developed in the past, but most of these studies focus on using computational models for the International Patent Classification (IPC) system rather than using these models in real-world cases of patent classification. In contrast to previous studies that combined algorithms and the IPC system directly without using expert screening, this study proposes a novel artificial intelligence (AI)-aided patent decision-making process. In this process, an expert screening approach is integrated with a hybrid genetic-based support vector machine (HGA-SVM) model for developing a patent classification system with the high classification accuracy and generalization ability for real-world patent searching cases. The proposed approach is tested on a real-world case—an expert's patent document searching history that contains 234 patent documents of semiconductor equipment components. The research results demonstrate that our proposed hybrid genetic algorithm approach can optimize all the parameters of the SVM for developing a patent classification system with a high accuracy. The proposed HGA-SVM model is able to dynamically and automatically classify patent documents by recording and learning the experts’ knowledge and logic. Finally, we propose a new decision-making process for improving the development of the SVM patent classification and searching system.