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# Which statistics measure is more important for marketing or risk models and Why ?

among KS, GINI, Rank ordering etc ;

we usually select KS for marketing models while for risk it is rank ordering

Does any body else have more ideas ?

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### Replies to This Discussion

I meant Komogorov Smirnov (KS) statistics used in logistic regression
Thanks a lot for the reply!!
Hi Bhaswati,
I have more than 4 years of experience building risk as well as marketing model using logistic regression. From my experience I think actually KS is used for the marketing models because here based on the Supreme difference of the old model and new model we can stop at the decile ,suppose KS is highest at the 5th decile then we can cut down on the mailing volume by 50%. As a matter of fact Gini and Rank ordering are checked simultaneously to finalize the model.

So if I have got it correct, KS is the measure used in marketing models to target a smaller base of customers to get a higher response from what we have got in any random case.
Basically an optimum solution where we are reducing cost and maximizing the profit at the same time. (Please correct me if I am wrong).

Any ideas on the measure for Risk Models?
Yes you right. Now for Risk modeling also we use KS but here we use the KS stat to derive the risk score where the difference between %good and %bad is maximum (here you basically plot %good and %bad on the y axis and Risk score derived from the model on the x axis and the check at what risk score the two lines are wide apart). Other than that Gini is the most crucial stat for Risk models.
Do you think that Rank ordering is also important for risk models?
Yes definitly both of this measure go side by side ....but I can tell you from my past experience that if Gini is high then Rank ordering holds good.
KS is a test statistic among nonparametric tests. I do not know if this could be used in this case, as the problem is not completely specified. If validation of the model is the goal then KS is one of the methods.
Thanks Sir!
Infact I was trying to validate on a hold out sample
What's the objective? How well does the model meet that objective?

Let me give some examples:
1) Model bank deposits based on demographics to get an understanding of what the expected deposits for each customer are, and their differences from the expected. Here, R^2 is appropriate.
2) We want to make prospecting mailings, but we can only mail to 5% of our potential list. Here the lift on the top 5% is the right criteria.
3) We want to understand customer attrition, and be able to make strategies accross the range of attrition risks. Here, an overall metric like KS is appropriate, although I use ROC.

Three different purposes, three different metrics.
Thanks a lot for the reply !!
The examples certainly help me to understand .....