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

[Mouldi Ben Ammar]

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%
--------------------------------------------------

[William Lisowski]

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