Novel Key Indicators Selection Method of Financial Fraud Prediction Model Based on Machine Learning Hybrid Mode

Abstract

In recent years, the financial fraud event of listed companies has occurred continuously. The financial fraud has brought huge losses to the capital market and investors, hindering the investment allocation mechanism of the capital market. The current financial fraud prediction model can judge the company that may conduct financial fraud in advance. So, this can reduce economic losses. The key factor to construct the financial fraud prediction model is how to select the evaluation indicators. This paper analyzes the existing indicators selection method and finds the problem of low prediction accuracy. A key indicators selection method of prediction model based on machine learning hybrid mode is proposed. First, the contribution degree of the selected algorithm and model is ranked according to the features. The support vector machine with good classification effect and heterogeneity with other models is used as the intermediate evaluation model. A variety of selected indicators from machine learning are tested for AUC on the intermediate model. Well-performing machine learning models are selected and combined into multiple hybrid modes. These hybrid models are tested for AUC again. Experiments demonstrate that the hybrid mode of Lasso method and random forest performed best in the AUC test. The repetition indicators of the hybrid model are then selected as important indicators of the prediction model. Finally, the correlation of the indicators is tested, and the indicators beyond the threshold are removed. The selected key indicators effectively improve the accuracy of financial fraud prediction.