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How Magic a Bullet Is Machine Learning for Credit Analysis? An Exploration with FinTech Lending Data
FinTech online lending to consumers has grown rapidly in the post-crisis era. As argued by its advocates, one key advantage of FinTech lending is that lenders can predict loan outcomes more accurately by employing complex analytical tools, such as machine learning (ML) methods. This study applies ML methods, in particular random forests and stochastic gradient boosting, to loan-level data from the largest FinTech lender of personal loans to assess the extent to which thosemethods can produce more accurate out-of-sample predictions of default on future loans relative to standard regression ...