I saw a website that was showing an Altman-Z score for companies in their Solvency section.
Not fully aware of this calculation, I decided to jump in and add it to my model.
I quickly backed it out.
Why?
Altman-Z uses different calculations based on the industry a company is in.
Manufacturers use one calculation, other companies use another, and banks and finance companies don't calculate it at all.
So imagine calculating this and feeding it into XGBoost / SHAP to predict price or return on a security.
First of all, because you have so many NaN values (nonexistents), you have a Missingness issue. Then, the values differ due to different calculation methods. If you don't cap the score, you can get outliers that wreak havoc.
So in the end, it's fine to calculate it, but if you calculate it, don't model it as a predictive feature.
Just calculate it and "tack it on" (staple it) to any sector-specific scores you are generating for purposes of stuff like rank within sector.
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