A Bank Is Interested in Identifying Different Attributes of Its

question 43

Essay

A bank is interested in identifying different attributes of its customers and below is the sample data of 150 customers. In the data table for the dummy variable Gender, 0 represents Male and 1 represents Female. And for the dummy variable Personal loan, 0 represents a customer who has not taken personal loan and 1 represents a customer who has taken personal loan.




Partition the data into training (50 percent), validation (30 percent), and test (20 percent) sets. Classify the data using k-nearest neighbors with up to k = 10. Use Age, Gender, Work experience, Income (in 1000 $), and Family size as input variables and Personal loan as the output variable. In Step 2 of XLMiner's k-nearest neighbors Classification procedure, be sure to Normalize input data and to Score on best k between 1 and specified value. Generate lift charts for both the validation data and test data.
a. For the cutoff probability value 0.5, what value of k minimizes the overall error rate on the validation data? Explain the difference in the overall error rate on the training, validation, and test data.
b. Examine the decile-wise lift chart on the test data. Identify and interpret the first decile lift.
c. For cutoff probability values of 0.5, 0.4, 0.3, and 0.2, what are the corresponding Class 1 error rates and Class 0 error rates on the validation data?

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Definitions:

Social Cognitive Theory

A theory that proposes that learning takes place through the observation, imitation, and the modeling of others within a social context.

Reciprocal Behavior

Mutual exchange of actions or attitudes between individuals or groups, where one's behavior is a response to the other.

Vicarious Learning

A process of learning by watching the actions or behaviors of another person.

Positive Consequences

Outcomes or results of an action that are beneficial or desirable, encouraging the repetition of the behavior that led to them.