Financial crisis prediction model using ant colony optimization

Uthayakumar J, Noura Metawa, K. Shankar and S.K. Lakshmanaprabu

International Journal of Information Management, 2020, vol. 50, issue C, 538-556

Abstract: Financial decisions are often based on classification models which are used to assign a set of observations into predefined groups. Different data classification models were developed to foresee the financial crisis of an organization using their historical data. One important step towards the development of accurate financial crisis prediction (FCP) model involves the selection of appropriate variables (features) which are relevant for the problems at hand. This is termed as feature selection problem which helps to improve the classification performance. This paper proposes an Ant Colony Optimization (ACO) based financial crisis prediction (FCP) model which incorporates two phases: ACO based feature selection (ACO-FS) algorithm and ACO based data classification (ACO-DC) algorithm. The proposed ACO-FCP model is validated using a set of five benchmark dataset includes both qualitative and quantitative. For feature selection design, the developed ACO-FS method is compared with three existing feature selection algorithms namely genetic algorithm (GA), Particle Swarm Optimization (PSO) algorithm and Grey Wolf Optimization (GWO) algorithm. In addition, a comparison of classification results is also made between ACO-DC and state of art methods. Experimental analysis shows that the ACO-FCP ensemble model is superior and more robust than its counterparts. In consequence, this study strongly recommends that the proposed ACO-FCP model is highly competitive than traditional and other artificial intelligence techniques.

Keywords: Bankruptcy prediction; Credit risk; Feature selection; Machine learning; Metaheuristic (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ininma:v:50:y:2020:i:c:p:538-556

DOI: 10.1016/j.ijinfomgt.2018.12.001

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