Title: Appraisal of companies with Bayesian networks

Authors: Priyantha Wijayatunga, Shigeru Mase, Masanori Nakamura

Addresses: Department of Mathematical and Computing Sciences, Tokyo Institute of Technology, W8-28, O-okayama, 2-12-1, Meguro-ku, 152-8552 Tokyo, Japan. ' Department of Mathematical and Computing Sciences, Tokyo Institute of Technology, W8-28, O-okayama, 2-12-1, Meguro-ku, 152-8552 Tokyo, Japan. ' Department of Mathematical and Computing Sciences, Tokyo Institute of Technology, W8-28, O-okayama, 2-12-1, Meguro-ku, 152-8552 Tokyo, Japan

Abstract: Appraisal of companies is an important business activity. We mainly apply Bayesian networks for this classification task for Japanese electric company data. Firstly, few standard statistical techniques are performed. Then Bayesian networks are applied in four steps: (1) for implementing a current procedure of economical experts, where economical variables are clustered and then summarised for computing a score for deciding the economical state of the company, (2) the same is done but with clustering of economical variables based on data, (3) the naive Bayes classifier and (4) an improved naive Bayes classifier through adjusting its conditional density of each feature variable given the class variable, which are initially obtained by maximum likelihood estimation. Adjustments are done by using the simulated annealing optimisation. Finally, a sensible way for appraisal of companies is discussed.

Keywords: dependence; naive Bayes assumption; Bayesian networks; probability adjustment; classification accuracy; company appraisal; Japan; electric companies; economic variables; simulated annealing; optimisation; credit rating; company performance; company evaluation.

DOI: 10.1504/IJBIDM.2006.009138

International Journal of Business Intelligence and Data Mining, 2006 Vol.1 No.3, pp.329 - 346

Published online: 06 Mar 2006 *

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