Question

When developing financial distress prediction models the sample of companies used to develop the module is the Select one:

a. prediction error
b. estimation sample
c. validation sample
d. cut-off point
e. None of the above

Answer 1

The sample of companies used to develop financial distress prediction models is called the estimation sample.

Step-by-step explanation:

When developing financial distress prediction models, the sample of companies used to develop the model is the estimation sample. This sample is used to estimate the parameters of the prediction model based on historical data.

For example, if a researcher wants to develop a financial distress prediction model using financial ratios, they may collect data from a sample of companies that have experienced financial distress in the past.

The estimation sample is important for training the prediction model and determining the relationship between the independent variables (financial ratios) and the dependent variable (financial distress).