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Discriminant Analysis
A statistical method used to predict group membership based on predictor variables, often used in market segmentation.
Implications
A statistical technique used to classify observations into predefined groups based on their characteristics, often used in marketing to segment customers or in finance to assess credit risk, by finding the linear combination of features that best separates the groups.
Example
Example: A bank uses discriminant analysis to categorize loan applicants into low-risk and high-risk groups based on factors like income, credit history, and employment status, improving lending decisions.
Related Terms
Different from regression analysis, which predicts a continuous outcome, discriminant analysis predicts categorical outcomes, such as group membership.
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