Machine Learning Based Classification Models for Financial Crisis Prediction

Abstract

Financial Crisis Prediction (FCP) being the most complicated and expected problem to be solved from the context of corporate organization, small scale to large scale industries, investors, bank organizations and government agencies, it is important to design a framework to determine a methodology that will reveal a solution for early prediction of the Financial Crisis Prediction (FCP). Earlier methods are reviewed through the various works in statistical techniques applied to solve the problem. However, it is not sufficient to predict the results with much more intelligence and automated manner. The major objective of this paper is to enhance the early prediction of Financial Crisis in any organization based on machine learning models like Multilayer Perceptron, Radial basis Function (RBF) Network, Logistic regression and Deep Learning methods and conduct a comparative analysis of them to determine the best methods for Financial Crisis Prediction (FDP). The testing is conducted with globalized benchmark datasets namely German dataset, Weislaw dataset and Polish Dataset. The testing is performed in both WEKA and Rapid Miner Framework design and obtained with accuracies and other performance measures like False Positive Rate (FPR), False Negative Rate (FNR), Precision, Recall, F-score and Kappa that would determine the best result from specific algorithm that will intelligently identify the financial crisis before it actually occurs in an organization. The results achieved the algorithms DL, MLP, LR and RBF Network with accuracies 96%, 72.10%, 75.20% and 74% on German Dataset, 91.25%, 85.83%, 83.75% and 73.75% on Weislaw dataset, 99.70%, 96.30%, 96.21% and 96.14 on Polish dataset respectively. It is evident from all the predictive results and the analytics in Rapid Miner that Deep Learning (DL) is the best classifier and performer among other machine learners and classifiers. This method will enhance the future predictions and would provide efficient solutions for financial crisis predictions.