By Donald van Deventer on 5/29/2009 11:49 PM

By Donald van Deventer on 5/27/2009 11:29 AM

By Donald van Deventer on 5/25/2009 2:20 AM

One of the most frequently asked questions when people review predictive models of default is this: “Aren’t those explanatory variables correlated, and doesn’t this create problems with multi-collinearity?” Since almost every default model has correlated explanatory variables, this is a question that comes up often. Since I am not an econometrician (although many of my colleagues are), this post collects quotes on this issue from nine popular econometrics texts (it was a 3 day weekend in the USA) to answer this question.

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By Donald van Deventer on 5/22/2009 7:21 PM

Z-man, senior Regional Banker, pointed out this quote from Donald Sull, faculty director of executive education at the London Business School, "My own sense is that we’ve got a lot of heroes of the last war still running around," he says. "[A bank] CEO is always a hard job, [but] it’s a much easier job when you’ve got a lot of tailwind. I think a lot of the current CEOs confused tailwind for horsepower." Institutional Investor, April 9, 2009.

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By Donald van Deventer on 5/21/2009 4:20 PM