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  • Classification of logistic regression predicted probability score to include unequal misclassification cost

    Dear All,


    I'm working on bankruptcy prediction models using logit regression with unbalanced data between the size of bankrupt and healthy firms (as mentioned in the table below ) , i found Corrected classification rate around 95% but this rate ignore low rate of prediction of bankrupt firms ( this due to the assumption of equal cost of miss-classification for both classes). Please how i can give a higher rate (cost) to the false negative than the false positive ? to minimize the average cost of miss-classification. Thank you

    . estat classification

    Logistic model for dep

    estat classification

    Logistic model for dep

    -------- True --------
    Classified | D ~D | Total
    -----------+--------------------------+-----------
    + | 2 8 | 10
    - | 596 99342 | 99938
    -----------+--------------------------+-----------
    Total | 598 99350 | 99948

    Classified + if predicted Pr(D) >= .5
    True D defined as dep != 0
    --------------------------------------------------
    Sensitivity Pr( +| D) 0.33%
    Specificity Pr( -|~D) 99.99%
    Positive predictive value Pr( D| +) 20.00%
    Negative predictive value Pr(~D| -) 99.40%
    --------------------------------------------------
    False + rate for true ~D Pr( +|~D) 0.01%
    False - rate for true D Pr( -| D) 99.67%
    False + rate for classified + Pr(~D| +) 80.00%
    False - rate for classified - Pr( D| -) 0.60%
    --------------------------------------------------
    Correctly classified 99.40%
    --------------------------------------------------

  • #2
    Welcome to Statalist.

    You have posted this topic in Statalist's Mata Forum, which is used for discussions of Stata's Mata language. You subsequently reposted it in the General Forum, where it is more appropriate, at
    https://www.statalist.org/forums/for...ification-cost
    If you have not already done so, take a look at the Statalist FAQ linked to at the top of this page for posting guidelines and suggestions.

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