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On the Financial Application of Discriminant Analysis: Comment

Published online by Cambridge University Press:  06 April 2009

Elton Scott
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Extract

In a timely, comprehensive article in this journal, Joy and Tollefson (J & T hereafter) treated design and interpretation problems for linear multiple discriminant analysis (LMDA). Although the article is generally correct in treating a complex topic, it has two problems:

1. The (widely-used) split-sample validation technique that J & T used is an inappropriate method for establishing the efficacy of the estimated discriminant function.

2. J & T reach erroneous conclusions on the correctness of two methods for assessing the discriminatory power of individual variables.

This comment addresses these two problems.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 13 , Issue 1 , March 1978 , pp. 201 - 205
Copyright
Copyright © School of Business Administration, University of Washington 1978

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References

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