Hostname: page-component-78c5997874-fbnjt Total loading time: 0 Render date: 2024-11-15T16:40:57.809Z Has data issue: false hasContentIssue false
  • English
  • Français

A Note on the Comparison of Logit and Discriminant Models of Consumer Credit Behavior

Published online by Cambridge University Press:  06 April 2009

John C. Wiginton
Get access Rights & Permissions [Opens in a new window]

Extract

Since the early work of Durand (1941), there has been considerable interest in using quantitative models of consumer credit behavior for credit-granting decisions. Most models are based on the concept of “scoring” by use of weights usually determined as statistically significant coefficients of some linear statistical model, frequently the linear discriminant model. It is the purpose of this note, however, to propose maximum likelihood estimation of the logit model as an alternative, and to compare the two models in a “scoring experiment.”

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 15 , Issue 3 , September 1980 , pp. 757 - 770
Copyright
Copyright © School of Business Administration, University of Washington 1980

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

[1]Awh, R. Y., and Waters, D.. “A Discriminant Analysis of Economic, Demographic, and Attitudinal Characteristics of Bank Charge-Card Holders: A Case Study.” Journal of Finance (06 1974), pp. 973–980.Google Scholar
[2]Capon, N. “Discrimination in Screening Credit Applicants.” Harvard Business Review (05–06 1978).Google Scholar
[3]Cooley, W. W., and Lohnes, P. R.. Multivariate Procedures for the Behavioral Sciences. New York: John Wiley & Sons, Inc. (1962).Google Scholar
[4]Cooley, W. W., and Lohnes, P. R.. Multivariate Data Analysis. New York: John Wiley & Sons, Inc. (1971).Google Scholar
[5]Durand, D.Risk Elements in Consumer Installment Financing. New York: NBER (1941).Google Scholar
[6]Eisenbeis, R. A., and Avery, R. B.. Discriminant Analysis and Classification Procedures: Theory and Practice. Lexington, Mass.: D. C. Heath (1972).Google Scholar
[7]Fienberg, S. E.The Analysis of Cross-Classified Categorical Data. Cambridge, Mass.: The MIT Press (1978).Google Scholar
[8]Gilbert, E. S. “On Discrimination Using Qualitative Variables.” Journal of the American Statistical Association (12 1968), pp. 1399–1412.CrossRefGoogle Scholar
[9]Goodman, L. A. “The Multivariate Analysis of Qualitative Data: Interactions among Multiple Classifications,” Journal of the American Statistical Association (03 1970), pp. 220–256.Google Scholar
[10]Goodman, L. A. “The Analysis of Multidimensional Contingency Tables: Stepwise Procedures and Direct Estimation Methods for Building Models for Multiple Classifications.” Technometrics (02 1971), pp. 33–61.Google Scholar
[11]Goodman, L. A. “Partitioning of Chi-Square, Analysis of Marginal Contingency Tables, and Estimation of Expected Frequencies in Multidimensional Contingency Tables.” Journal of the American Statistical Association (06 1971), pp. 339–344.CrossRefGoogle Scholar
[12]Halperin, M.; Blackwelder, W. C.; and Verter, J. I.. “Estimation of the Multivariate Logistic Risk Function: A Comparison of the Discriminant Function and Maximum Likelihood Approaches.” Journal of Chronic Diseases, Vol. 24 (1971), pp. 125–158.CrossRefGoogle ScholarPubMed
[13]Joy, O. M., and Tollefson, J. O.. “On the Financial Applications of Discriminant Analysis.” Journal of Financial and Quantitative Analysis (12 1975), pp. 723–739.Google Scholar
[14]Lane, S. “Submarginal Credit Risk Classifications.” Journal of Financial and Quantitative Analysis (01 1972), pp. 1379–1385.CrossRefGoogle Scholar
[15]McFadden, D. “Conditional Logit Analysis of Qualitative Choice Behavior.” In Frontiers in Econometrics, ed. by Zaremka, P.. New York: Academic Press (1974).Google Scholar
[16]McFadden, D. “A Comment on Discriminant Analysis ‘versusrsquo; Logit Analysis.” Annals of Economic and Social Measurement, Vol. 5 (1976), pp. 511–523.Google Scholar
[17]Morrison, D. G. “On the Interpretation of Discriminant Analysis.” Journal of Marketing Research, Vol. 6 (05 1969), pp. 156–163.CrossRefGoogle Scholar
[18]Myers, J. H., and Forgy, E. W.. “The Development of Numerical Credit Evaluation Systems.” Journal of the American Statistical Association (09 1963), pp. 799–806.CrossRefGoogle Scholar
[19]Nerlove, M., and Press, S. J.. Univariate and Multivariate Log-Linear and Logistic Models.” Santa Monica: Rand Corporation, Report R–1306–EDA/NIH (12 1973).Google Scholar
[20]Neter, J., and Wasserman, W.. Applied Linear Statistical Models. Homewood, Illinois: Richard D. Irwin, Inc. (1974).Google Scholar
[21]Pindyck, R. S., and Rubenfeld, D. L.. Econometric Models and Economic Forecasts. New York: McGraw-Hill Book Company (1976).Google Scholar