IDEAS home Printed from https://ideas.repec.org/a/sae/ausman/v16y1991i2p165-185.html
   My bibliography  Save this article

A Security Analyst's Action Recommendations: An Application of Recursive Partitioning to Modelling Judgement

Author

Listed:
  • Bryan Howieson

    (Lecturer, Department of Accounting and Finance, University of Western Australia, Nedlands WA 6009.)

Abstract

This paper illustrates an approach to modelling judgement. Mathematically, derived sequential decision tree models of judgement are constructed using the Classification And Regression Tree (CART) algorithm developed by Breiman et al. (1984). This technique was selected because it attempts to combine the predictive power of regression based models with the descriptive appeal of decision tree models based on verbal protocols. CART was used in the context of a study which attempted to model the decision processes used by the security analysts of a managed fund to make action recommendations. The CART model revealed that the decision processes of security analysts were complicated and that infor Mation was processed configurally. In general, the CART model achieved low error rates and had a predictive power that was at least equivalent if not better than multinomial LOGIT.

Suggested Citation

  • Bryan Howieson, 1991. "A Security Analyst's Action Recommendations: An Application of Recursive Partitioning to Modelling Judgement," Australian Journal of Management, Australian School of Business, vol. 16(2), pages 165-185, December.
    • Handle: RePEc:sae:ausman:v:16:y:1991:i:2:p:165-185
    DOI: 10.1177/031289629101600204
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/031289629101600204
    Download Restriction: no
    File URL: https://libkey.io/10.1177/031289629101600204?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    2. Slovic, Paul, 1972. "Psychological Study of Human Judgment: Implications for Investment Decision-Making," Journal of Finance, American Finance Association, vol. 27(4), pages 779-799, September.
    3. Libby, Robert & Lewis, Barry L., 1982. "Human information processing research in accounting: The state of the art in 1982," Accounting, Organizations and Society, Elsevier, vol. 7(3), pages 231-285, July.
    4. Slovic, Paul & Fleissner, Dan & Bauman, W Scott, 1972. "Analyzing the Use of Information in Investment Decision Making: A Methodological Proposal," The Journal of Business, University of Chicago Press, vol. 45(2), pages 283-301, April.
    5. Biggs, Stanley F., 1984. "Financial analysts' information search in the assessment of corporate earning power," Accounting, Organizations and Society, Elsevier, vol. 9(3-4), pages 313-323, October.
    6. Bouwman, Marinus J. & Frishkoff, Patricia A. & Frishkoff, Paul, 1987. "How do financial analysts make decisions? A process model of the investment screening decision," Accounting, Organizations and Society, Elsevier, vol. 12(1), pages 1-29, January.
    7. Marais, Ml & Patell, Jm & Wolfson, Ma, 1984. "The Experimental-Design Of Classification Models - An Application Of Recursive Partitioning And Bootstrapping To Commercial Bank Loan Classifications," Journal of Accounting Research, Wiley Blackwell, vol. 22, pages 87-114.
    8. Frydman, Halina & Altman, Edward I & Kao, Duen-Li, 1985. "Introducing Recursive Partitioning for Financial Classification: The Case of Financial Distress," Journal of Finance, American Finance Association, vol. 40(1), pages 269-291, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chang, Sean Tat & Ross, Donald, 2016. "Debt covenants and credit spread valuation: The special case of Chinese global bonds," Global Finance Journal, Elsevier, vol. 30(C), pages 27-44.
    2. Poon, Winnie P. H. & Firth, Michael & Fung, Hung-Gay, 1999. "A multivariate analysis of the determinants of Moody's bank financial strength ratings," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 9(3), pages 267-283, August.
    3. repec:zbw:bofrdp:2009_035 is not listed on IDEAS
    4. Hu, Yu-Chiang & Ansell, Jake, 2007. "Measuring retail company performance using credit scoring techniques," European Journal of Operational Research, Elsevier, vol. 183(3), pages 1595-1606, December.
    5. Demyanyk, Yuliya & Hasan, Iftekhar, 2009. "Financial crises and bank failures: a review of prediction methods," Bank of Finland Research Discussion Papers 35/2009, Bank of Finland.
    6. Krishnamoorthy, Ganesh & Maroney, James J. & Ó hÓgartaigh, Ciarán, 2008. "20-F reconciliations and investment recommendations by financial professionals," Journal of Business Research, Elsevier, vol. 61(4), pages 355-362, April.
    7. Zeineb Affes & Rania Hentati-Kaffel, 2016. "Predicting US banks bankruptcy: logit versus Canonical Discriminant analysis," Post-Print halshs-01281948, HAL.
    8. Espahbodi, Hassan & Espahbodi, Pouran, 2003. "Binary choice models and corporate takeover," Journal of Banking & Finance, Elsevier, vol. 27(4), pages 549-574, April.
    9. Ravi Kumar, P. & Ravi, V., 2007. "Bankruptcy prediction in banks and firms via statistical and intelligent techniques - A review," European Journal of Operational Research, Elsevier, vol. 180(1), pages 1-28, July.
    10. Zeineb Affes & Rania Hentati-Kaffel, 2016. "Predicting US banks bankruptcy: logit versus Canonical Discriminant analysis," Documents de travail du Centre d'Economie de la Sorbonne 16016, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    11. Paolo Angelis & Fulvio Gismondi & Riccardo Ottaviani, 1994. "A non-parametric statistical model for the control of Italian insurance companies," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 17(1), pages 69-84, March.
    12. de Andres, Javier & Landajo, Manuel & Lorca, Pedro, 2005. "Forecasting business profitability by using classification techniques: A comparative analysis based on a Spanish case," European Journal of Operational Research, Elsevier, vol. 167(2), pages 518-542, December.
    13. Fogarty, Timothy J. & Rogers, Rodney K., 2005. "Financial analysts' reports: an extended institutional theory evaluation," Accounting, Organizations and Society, Elsevier, vol. 30(4), pages 331-356, May.
    14. Carlos Serrano-Cinca, 1997. "Feedforward neural networks in the classification of financial information," The European Journal of Finance, Taylor & Francis Journals, vol. 3(3), pages 183-202.
    15. fernández, María t. Tascón & gutiérrez, Francisco J. Castaño, 2012. "Variables y Modelos Para La Identificación y Predicción Del Fracaso Empresarial: Revisión de La Investigación Empírica Reciente," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 15(1), pages 7-58.
    16. Chowdhury, Ashiqul Haq & Priyo, Asad Karim Khan, 2019. "How Do Bangladeshi Investors Take Decisions? An Ethnographic Decision Tree Model of Stock Selection," MPRA Paper 118105, University Library of Munich, Germany.
    17. Somerville, R. A. & Taffler, R. J., 1995. "Banker judgement versus formal forecasting models: The case of country risk assessment," Journal of Banking & Finance, Elsevier, vol. 19(2), pages 281-297, May.
    18. Dimitras, A. I. & Zanakis, S. H. & Zopounidis, C., 1996. "A survey of business failures with an emphasis on prediction methods and industrial applications," European Journal of Operational Research, Elsevier, vol. 90(3), pages 487-513, May.
    19. Sylvain Durocher, 2009. "The future of interpretive accounting research," Qualitative Research in Accounting & Management, Emerald Group Publishing Limited, vol. 6(3), pages 137-159, July.
    20. Barniv, Ran & Mehrez, Abraham & Kline, Douglas M., 2000. "Confidence intervals for controlling the probability of bankruptcy," Omega, Elsevier, vol. 28(5), pages 555-565, October.
    21. Joseph J. Schultz Jr. & Sandra G. Gustavson & Frank K. Reilly, 1985. "Factors Influencing The New York Stock Exchange Specialists' Price-Setting Behavior: An Experiment," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 8(2), pages 137-144, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:ausman:v:16:y:1991:i:2:p:165-185. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.agsm.edu.au .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.