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Testing Distributions in Banking Sector Loans with Different Computer Programs: An Experimental Analysis for Turkey

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  • Afsin Sahin

Abstract

Within the fields of risk management and banking, the normality condition is one of the basic assumptions to apply value at risk, capital asset pricing or linear regression models on credit risk assessment. However, banking sector data related to loans may not be normally distributed. Hence, it needs to be put through scientific tests. For this purpose, firstly, Anderson-Darling, Jarque-Bera, Kolmogorov-Smirnov, Shapiro-Wilk, and Shapiro-Francia tests are applied to ninety-two banking sector loan variables and it is demonstrated that most of the variables are not normally distributed. Additionally, the parameters of Normal, Birnbaum-Saunders, Exponential, Extreme Value, Gamma, Generalized Extreme Value, Inverse Gaussian, LogLogistic, Logistic, Lognormal, Nakagami, Negative Binomial, Non-Parametric, Poisson, Rayleigh, Rician, t- Location-Scale, and Weibull distributions are estimated for loan variables. Thirdly, when the data are not normally distributed, it is necessary to examine the other test results. Therefore, Kolmogorov-Smirnov, Anderson Darling, and Chi-square test results are employed for sixty-one distributions related to the variables and best fitted distribution per variable is aimed at. The results indicate that different computer codes and programs may give different outcomes in connection with the normality and best fitting distribution. Therefore, the use of different strategies may also be adopted in risk management courses along with the traditional ones since the normality assumption is an essential first step for the application of such techniques. Finally, pedagogically speaking, it should be noted that teaching the essence of mathematical background and computer codes could be strategically useful for students in internalizing these distribution concepts.

Suggested Citation

  • Afsin Sahin, 2023. "Testing Distributions in Banking Sector Loans with Different Computer Programs: An Experimental Analysis for Turkey," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 9(2), pages 145-158, April.
    • Handle: RePEc:ate:journl:ajbev9i2-2
    DOI: 10.30958/ajbe.9-2-2
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