What does weight of evidence do?
What does weight of evidence do?
The weight of evidence tells the predictive power of an independent variable in relation to the dependent variable. Since it evolved from credit scoring world, it is generally described as a measure of the separation of good and bad customers. “Bad Customers” refers to the customers who defaulted on a loan.
How is information value measured?
Foundational Measures of Information Value
- Validity: The percent of records with correct values.
- Scarcity: An estimate of the percent of other organizations who don’t have this data.
- Coverage: The number of records in the dataset as a percentage of the total universe of potential records.
What is woe in logistic regression?
Weight of evidence (WOE) coding of a nominal or discrete variable is widely used when preparing predictors for usage in binary logistic regression models. When using WOE coding, an important preliminary step is binning of the levels of the predictor to achieve parsimony without giving up predictive power.
What is woe machine learning?
Weight of evidence (WOE) is a powerful tool for feature representation and evaluation in data science. WOE can provide interpret able transformation to both categorical and numerical features. The postcode can be viewed as a categorical feature and encoded into a one-hot vector.
Can information value be greater than 1?
Yes, it does have an upper bound, but not 1. The mutual information (in bits) is 1 when two parties (statistically) share one bit of information. However, they can share a arbitrary large data. In particular, if they share 2 bits, then it is 2.
What does weight of evidence approach mean?
A weight of evidence (WoE) approach is a familiar concept found in scientific and regulatory literature. It is generally understood as a method for decision-making that involves consideration of multiple sources of information and lines of evidence.
What is a good information value?
The following table provides a standard rule of thumb for using the Information Value to understand the predictive power of each variable….Information Value and Weight of Evidence Analysis.
| Information Value | Predictive Power |
|---|---|
| 0.02 – 0.1 | Weak |
| 0.1 – 0.3 | Medium |
| 0.3 – 0.5 | Strong |
| > 0.5 | Suspiciously good; too good to be true |
What is information value and weight of evidence?
The weight of evidence (WOE) and information value (IV) provide a great framework for performing exploratory analysis and variable screening prior to building a binary classifier (e.g., logistic regression). It seamlessly handles missing values and character variables, and the output is easy to interpret.
What is meant by weight in the context of evidence in court?
n. the strength, value and believability of evidence presented on a factual issue by one side as compared to evidence introduced by the other side. ( See: evidence, preponderance of the evidence)
How is information value?
Generally speaking, Information Value provides a measure of how well a variable X is able to distinguish between a binary response (e.g. “good” versus “bad”) in some target variable Y.
When to use weight of evidence and information value?
This time, we will continue from where we left in the previous article and use weight of evidence (WOE) for age to develop a new model. Additionally, we will also explore the predictive power of the variable (age) through information value. Information value is a very useful concept for variable selection during model building.
When to use weight of evidence in logistic regression?
Weight of Evidence (WOE) is used as a method of transformation of independent variables to build strict linear relationship with log odds (in case of logistic regression). With the use of WOE, we can handle categorical variables which means it avoids the need to create dummy variables in case of categorical variables.
How is weight of evidence used in Woe framework?
Hence, when building a logistic regression model – which is perhaps the most widely used technique for building binary classifiers – we are actually trying to estimate the weight of evidence. Last, but not least, the WOE framework has ties to the well-known naive Bayes classifier, given by (see [1]):
How to calculate weight of evidence ( WoE ) in Excel?
Download the attached Excel to understand this calculation : Information Value (IV) and Weight of Evidence (WOE) Finally, component of IV for this group is (-0.057)*(-0.553) = 0.0318. Similarly, calculate the IV components for all the other coarse classes. Adding these components will produce the IV value of 0.1093 (last column of the table).