Since decades, the topic of business failure prediction has been an important research area for both academics and practitioners. Bankruptcy prediction involves the classification of firms in a failing and a non-failing group3. Generally, this classification is based on (1) a prediction model...

We give an overview of the shortcomings of the most frequently used statistical techniques in failure prediction modelling. The statistical procedures that underpin the selection of variables and the determination of coefficients often lead to ‘overfitting’. We also see that the ‘expected...

During the past decade, there has been a revolution in investment management. If you pick up any professional investment journal in the States you will find that the articles and advertisements continually refer to Modern Portfolio Theory or MPT. At the heart of MPT is the notion of risk...