Statistics and Econometrics
Mid-Term – Bank Loan Default
The question requires us to understand what factors could lead to people defaulting on their loans. The variables that will be discussed include age, education, employment, address, income etc. An overview of the data will be provided along with assessing inter-relationships among variables as well as providing a good fit model.
II. Overview of Data
The sample includes 700 observations in the data set based on the ...view middle of the document...
The average years that a person stays with their current employer are 8.38 years. The minimum is 0 years and the maximum is 31 years with the employer.
The average years that a person stays at their current address is 8.27 years. The minimum is 0 years and the maximum that someone will stay at their current address is 34 years.
The average household income in thousands is 45.60. The minimum household income in the sample is 14 and the maximum is 446 thousand dollars.
The average debt to income ratio (x100) is 10.26. The minimum debt to income in the sample is 0.4 whereas the maximum ratio was 41.3.
The average credit card debt is 1.55. The minimum credit card debt is 0.012 whereas the maximum credit card debt is 20.56.
Default being the independent variable, I conducted a “tab default” command, which showed that 517 people or 73.86% of the total sample have not defaulted on their bank loans. On the other hand, the remaining 183 people or 26.14% of the total sample have defaulted previously on their bank loans.
Using the tab command for high school, some college and college degree, we find that out of all the 700 observations, 502...