I have performed a logistic regression to estimate the default probability of a dataset of firms based on some basic balance-sheet ratios. I have winsorized all the ratios at the 1st and 99th percentile.

My question is: now that I want to use my estimated model on a new dataset for forecasting purposes, should I also winsorize this dataset as I did for the calibration dataset?

For example: if firm X in the forcasting dataset has a turnover of 1.1 billion but the 99% percentile in the forcasting dataset is 1 billion, should I change the turnover value for firm X to 1billion.

Thanks a lot.


Leaving aside whether the original winsorizing is a good idea (I suspect not), the answer is yes. The estimated coefficients are for winsorized variables and would have to be different to work with I transformed data.


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