Hofmarcher, Paul, Kerbl, Stefan, Grün, Bettina, Sigmund, Michael, Hornik, Kurt. 2012. Model Uncertainty and Aggregated Default Probabilities: New Evidence from Austria. Research Report Series, Institute for Statistics and Mathematics, Report 116.

RIS

@MISC{Hofmarcher2012,
title = {Model Uncertainty and Aggregated Default Probabilities: New Evidence from Austria},
author = {Paul Hofmarcher and Stefan Kerbl and Bettina Grün and Michael Sigmund and Kurt Hornik},
year = {2012},
url = {http://epub.wu.ac.at/3383/},
language = {EN},
series = {Research Report Series, Institute for Statistics and Mathematics, Report 116},
abstract = {Understanding the determinants of aggregated default probabilities (PDs) has attracted substantial research over the past decades. This study addresses two major difficulties in understanding the determinants of aggregate PDs: Model uncertainty and multicollinearity among the regressors. We present Bayesian Model Averaging (BMA) as a powerful tool that overcomes model uncertainty. Furthermore, we supplement BMA with ridge regression to mitigate multicollinearity. We apply our approach to an Austrian dataset. Our findings suggest that factor prices like short term interest rates and energy prices constitute major drivers of default rates, while firms' profits reduce the expected number of failures. Finally, we show that the results of our baseline model are fairly robust to the choice of the prior model size.},
}