Flat Maximum Effect

From Open Risk Manual

Definition

The Flat Maximum Effect is an informal term capturing a potential pathology (weakness) of statistical models where models with different coefficients or even belonging to different model classes can have similar performance on prediction or classification.

The term originates from the shape of the error function or the Likelihood Function when it exhibits reduced sensitivity to model parameters near its maximum

Impact

  • Difficulty selecting the most appropriate model
  • Difficulty to interpret (explain) outcomes in terms of model parameters