Variable selection in proportional hazards cure model with time-varying covariates, application to US bank failures

Beretta, Alessandro;Heuchenne, Cédric
(2018) , 20 pages

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Abstract
From a survival analysis perspective, bank failure data are often characterized by small default rates and heavy censoring. This empirical evidence can be explained by the existence of a subpopulation of banks likely immune from bankruptcy. In this regard, we use a mixture cure model to separate the factors with an inuence on the susceptibility to default from the ones affecting the survival time of susceptible banks. In this paper, we extend a semi-parametric proportional hazards cure model to time-varying covariates and we propose a variable selection technique based on its penalized likelihood. By means of a simulation study, we show how this technique performs reasonably well. Finally, we illustrate an application to commercial bank failures in the United States over the period 2006-2016.
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Beretta, A., & Heuchenne, C. (2018). Variable selection in proportional hazards cure model with time-varying covariates, application to US bank failures (ISBA Discussion Paper 2018/33). https://hdl.handle.net/2078.5/173732