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Random forests-based early warning system for bank failures

Author

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  • Tanaka, Katsuyuki
  • Kinkyo, Takuji
  • Hamori, Shigeyuki

Abstract

This paper introduces a novel random forests-based early warning system for predicting bank failures. We apply this method to the analysis of bank-level financial statements, in order to find patterns that identify banks in danger of failing. The experimental results show that our method outperforms conventional methods in terms of prediction accuracy.

Suggested Citation

  • Tanaka, Katsuyuki & Kinkyo, Takuji & Hamori, Shigeyuki, 2016. "Random forests-based early warning system for bank failures," Economics Letters, Elsevier, vol. 148(C), pages 118-121.
    • Handle: RePEc:eee:ecolet:v:148:y:2016:i:c:p:118-121
    DOI: 10.1016/j.econlet.2016.09.024
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    References listed on IDEAS

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    More about this item

    Keywords

    Random forests; Early warning system; Bank failure;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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