Browsing by Author "Chu, C. K."

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A Two-Stage Probit Model for Predicting Recovery Rates
(2016-12)
Hwang, Ruey-Ching
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Chung, Huimin
;
Chu, C. K.
;
資訊管理與財務金融系註：原資管所+財金所
;
Department of Information Management and Finance
We propose a two-stage probit model (TPM) to predict recovery rates. By the ordinal nature of the three categories of recovery rates: total loss, total recovery, and lying between the two extremes, we first use the ordered probit model to predict the category that a given debt belongs to among the three ones. Then, for the debt that is classified as lying between the two extremes, we use the probit transformation regression to predict its recovery rate. We use real data sets to support TPM. Our empirical results show that macroeconomic-, debt-, firm-, and industry-specific variables are all important in determining recovery rates. Using an expanding rolling window approach, our empirical results confirm that TPM has better and more robust out-of-sample performance than its alternatives, in the sense of yielding more accurate predicted recovery rates.
Assessing bankruptcy prediction models via information content of technical inefficiency
(2011-12-01)
Hwang, Ruey-Ching
;
Siao, Jhao-Siang
;
Chung, Huimin
;
Chu, C. K.
;
資訊管理與財務金融系註：原資管所+財金所
We use a stochastic frontier model with firm-specific technical inefficiency effects in a panel framework (Battese and Coelli in Empir Econ 20:325-332, 1995) to assess two popular probability of bankruptcy (PB) measures based on Merton model (Merton in J Financ 29:449-470, 1974) and discrete-time hazard model (DHM; Shumway in J Bus 74:101-124, 2001). Three important results based on our empirical studies are obtained. First, a firm with a higher PB generally has less technical efficiency. Second, for an ex-post bankrupt firm, its PB tends to increase and its technical efficiency of production tends to decrease, as the time to its bankruptcy draws near. Finally, the information content about firm's technical inefficiency provided by PB based on DHM is significantly more than that based on Merton model. By the last result and the fact that economic-based efficiency measures are reasonable indicators of the long-term health and prospects of firms (Baek and Pagan in Q J Bus Econ 41:27-41, 2002), we conclude that PB based on DHM is a better credit risk proxy of firms.
Predicting issuer credit ratings using a semiparametric method
(2010-01-01)
Hwang, Ruey-Ching
;
Chung, Huimin
;
Chu, C. K.
;
資訊管理與財務金融系註：原資管所+財金所
;
Department of Information Management and Finance
This paper proposes a prediction method based on an ordered semiparametric probit model for credit risk forecast. The proposed prediction model is constructed by replacing the linear regression function in the usual ordered probit model with a semiparametric function, thus it allows for more flexible choice of regression function. The unknown parameters in the proposed prediction model are estimated by maximizing a local (weighted) log-likelihood function, and the resulting estimators are analyzed through their asymptotic biases and variances. A real data example for predicting issuer credit ratings is used to illustrate the proposed prediction method. The empirical result confirms that the new model compares favorably with the usual ordered probit model. (C) 2009 Elsevier B.V. All rights reserved.