The Journal of Business Publication Info
For information about individual subscriptions for this title, please visit the Individual Access page.
For information about institutional access to this title, please visit the Institutional Subscriptions page.
Forecasting Bankruptcy More Accurately: A Simple Hazard Model*
Formats Available in JSTOR: PDF
Abstract(back to top)
I argue that hazard models are more appropriate than single‐period models for forecasting bankruptcy. Single‐period models are inconsistent, while hazard models produce consistent estimates. I describe a simple technique for estimating a discrete‐time hazard model. I find that about half of the accounting ratios that have been used in previous models are not statistically significant. Moreover, market size, past stock returns, and idiosyncratic returns variability are all strongly related to bankruptcy. I propose a model that uses both accounting ratios and market‐driven variables to produce out‐of‐sample forecasts that are more accurate than those of alternative models.
Bibliographic Information(back to top)
- Forecasting Bankruptcy More Accurately: A Simple Hazard Model
- Tyler Shumway
- The Journal of Business
- Vol. 74, No. 1 (January 2001) (pp. 101-124)
Notes and References(back to top)
This item contains 1 note(s).
Notes
* I thank Chris Acito, Steve Boyce, John Cochrane, George Constantinides, Dennis Capozza, Kathryn Clark, Josh Coval, Eugene Fama, Chris Geczy, Paul Gompers, Steve Kaplan, Michael Parzen, Burt Porter, Ross Stevens, Kelly Welch, Sven Wilson, Arnold Zellner, Luigi Zingales, Mark Zmijewski, an anonymous referee, and seminar participants at the University of Chicago, Brigham Young University, and the University of Michigan for suggestions.
Items Citing this Item (back to top)
14 item(s) in JSTOR cite this item
- Qing He, Terence Tai-Leung Chong, Li Li, Jun ZhangVol. 39, No. 4 (WINTER 2010) pp. 1697-1718Stable URL: http://www.jstor.org/stable/40963525
- Leonardo Becchetti, Annalisa Castelli, Iftekhar HasanVol. 35, No. 4 (November 2010) pp. 467-497Stable URL: http://www.jstor.org/stable/40927531
- CRAIG DOIDGE, G. ANDREW KAROLYI, RENÉ M. STULZVol. 65, No. 4 (AUGUST 2010) pp. 1507-1553Stable URL: http://www.jstor.org/stable/40864918
- Sudheer Chava, Amiyatosh PurnanandamVol. 23, No. 6 (June 2010) pp. 2523-2559Stable URL: http://www.jstor.org/stable/40604741
- Thomas J. Chemmanur, Shan He, Debarshi K. NandyVol. 23, No. 5 (May 2010) pp. 1855-1908Stable URL: http://www.jstor.org/stable/40604833
- VLADIMIR A. GATCHEV, TODD PULVINO, VEFA TARHANVol. 65, No. 2 (APRIL 2010) pp. 725-763Stable URL: http://www.jstor.org/stable/25656308
- M. Malik, L. C. ThomasVol. 61, No. 3, Consumer Credit Risk Modelling; Transportation, Logistics and the Environment (Mar., 2010) pp. 411-420Stable URL: http://www.jstor.org/stable/40540268
- Chris Downing, Shane Underwood, Yuhang XingVol. 44, No. 5 (Oct., 2009) pp. 1081-1102Stable URL: http://www.jstor.org/stable/40505960
- John Y. Campbell, Jens Hilscher, Jan SzilagyiVol. 63, No. 6 (Dec., 2008) pp. 2899-2939Stable URL: http://www.jstor.org/stable/20487953
- Lorenzo Garlappi, Tao Shu, Hong YanVol. 21, No. 6 (Nov., 2008) pp. 2743-2778Stable URL: http://www.jstor.org/stable/40056898
- Sreedhar T. Bharath, Tyler ShumwayVol. 21, No. 3 (May, 2008) pp. 1339-1369Stable URL: http://www.jstor.org/stable/40056852
- Laurel A. Franzen, Kimberly J. Rodgers, Timothy T. SiminVol. 62, No. 6 (Dec., 2007) pp. 2931-2967Stable URL: http://www.jstor.org/stable/4622358
- Sanjiv R. Das, Darrell Duffie, Nikunj Kapadia, Leandro SaitaVol. 62, No. 1 (Feb., 2007) pp. 93-117Stable URL: http://www.jstor.org/stable/4123457
- George R. G. Clarke and Robert CullVol. 45, No. 1 (April 2002) pp. 165-197Stable URL: http://www.jstor.org/stable/10.1086/324653