Predicting binary outcomes

Graham Elliott, Robert P. Lieli*

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    Abstract (may include machine translation)

    We address the issue of using a set of covariates to categorize or predict a binary outcome. This is a common problem in many disciplines including economics. In the context of a prespecified utility (or cost) function we examine the construction of forecasts suggesting an extension of the Manski (1975, 1985) maximum score approach. We provide analytical properties of the method and compare it to more common approaches such as forecasts or classifications based on conditional probability models. Large gains over existing methods can be attained when models are misspecified.

    Original languageEnglish
    Pages (from-to)15-26
    Number of pages12
    JournalJournal of Econometrics
    Volume174
    Issue number1
    DOIs
    StatePublished - May 2013

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