Paolo Giudici

Jingyi Wang, Ying Chen, Paolo Giudici

We propose Group Shapley, a metric that extends the classical individual-level Shapley value framework to evaluate the importance of feature groups, addressing the structured nature of predictors commonly found in business and economic data. More importantly, we develop a significance testing procedure based on a three-cumulant chi-square approximation and establish the asymptotic properties of the test statistics for Group Shapley values. Our approach can effectively handle challenging scenarios, including sparse or skewed distributions and small sample sizes, outperforming alternative tests such as the Wald test. Simulations confirm that the proposed test maintains robust empirical size and demonstrates enhanced power under diverse conditions. To illustrate the method's practical relevance in advancing Explainable AI, we apply our framework to bond recovery rate predictions using a global dataset (1996-2023) comprising 2,094 observations and 98 features, grouped into 16 subgroups and five broader categories: bond characteristics, firm fundamentals, industry-specific factors, market-related variables, and macroeconomic indicators. Our results identify the market-related variables group as the most influential. Furthermore, Lorenz curves and Gini indices reveal that Group Shapley assigns feature importance more equitably compared to individual Shapley values.

Sofia Vei, Paolo Giudici, Pavlos Sermpezis et al.

The absolute dominance of Artificial Intelligence (AI) introduces unprecedented societal harms and risks. Existing AI risk assessment models focus on internal compliance, often neglecting diverse stakeholder perspectives and real-world consequences. We propose a paradigm shift to a human-centric, harm-severity adaptive approach grounded in empirical incident data. We present AI Harmonics, which includes a novel AI harm assessment metric (AIH) that leverages ordinal severity data to capture relative impact without requiring precise numerical estimates. AI Harmonics combines a robust, generalized methodology with a data-driven, stakeholder-aware framework for exploring and prioritizing AI harms. Experiments on annotated incident data confirm that political and physical harms exhibit the highest concentration and thus warrant urgent mitigation: political harms erode public trust, while physical harms pose serious, even life-threatening risks, underscoring the real-world relevance of our approach. Finally, we demonstrate that AI Harmonics consistently identifies uneven harm distributions, enabling policymakers and organizations to target their mitigation efforts effectively.