Machine Learning with R Quick Start Guide

Ordered logistic regression

As we have seen, decision trees perform well in multi-classification problems. There are other approaches we could follow too. One of them is logistic regression, which gives six possible outcomes to a problem. Nevertheless, this approach has some limitations. For example, we are assuming that there is no order to the categories in the target variable. It means that different categories or classes in the target variable are nominal. In the case of ratings, this assumption is not necessarily true, because ratings assign a ranking. Moreover, differences between credit ratings are not the same, which means that the difference between AAA and AA+ ratings is not necessarily equal to the difference between BBB and BBB- ...