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I was starting to look into area under curve(AUC) and am a little confused about its usefulness. When first explained to me, AUC seemed to be a great measure of performance but in my research I've found that some claim its advantage is mostly marginal in that it is best for catching 'lucky' models with high standard accuracy measurements and low AUC.

So should I avoid relying on AUC for validating models or would a combination be best? Thanks for all your help.

Really great question, and one that I find that most people don't really understand on an intuitive level. AUC is in fact often preferred over accuracy for binary classification for a number of different reasons. First though, let's talk about exactly what AUC is. Honestly, for being one of the most widely used efficacy metrics, it's surprisingly obtuse to figure out exactly how AUC works.

AUC stands for Area Under the Curve, which curve you ask? Well, that would be the ROC curve. ROC stands for Receiver Operating Characteristic, which is actually slightly non-intuitive. The implicit goal of AUC is to deal with situations where you have a very skewed sample distribution, and don't want to overfit to a single class.

A great example is in spam detection. Generally, spam datasets are STRONGLY biased towards ham, or not-spam. If your data set is 90% ham, you can get a pretty damn good accuracy by just saying that every single email is ham, which is obviously something that indicates a non-ideal classifier. Let's start with a couple of metrics that are a little more useful for us, specifically the true positive rate (TPR) and the false positive rate (FPR):

Now in this graph, TPR is specifically the ratio of true positive to all positives, and FPR is the ratio of false positives to all negatives. (Keep in mind, this is only for binary classification.) On a graph like this, it should be pretty straightforward to figure out that a prediction of all 0's or all 1's will result in the points of (0,0) and (1,1) respectively. If you draw a line through these lines you get something like this:

Which looks basically like a diagonal line (it is), and by some easy geometry, you can see that the AUC of such a model would be 0.5 (height and base are both 1). Similarly, if you predict a random assortment of 0's and 1's, let's say 90% 1's, you could get the point (0.9, 0.9), which again falls along that diagonal line.

Now comes the interesting part. What if we weren't only predicting 0's and 1's? What if instead, we wanted to say that, theoretically we were going to set a cutoff, above which every result was a 1, and below which every result were a 0. This would mean that at the extremes you get the original situation where you have all 0's and all 1's (at a cutoff of 0 and 1 respectively), but also a series of intermediate states that fall within the 1x1 graph that contains your ROC. In practice you get something like this:

So basically, what you're actually getting when you do an AUC over accuracy is something that will strongly discourage people going for models that are representative, but not discriminative, as this will only actually select for models that achieve false positive and true positive rates that are significantly above random chance, which is not guaranteed for accuracy.

AUC and accuracy are fairly different things. AUC applies to binary classifiers that have some notion of a decision threshold internally. For example logistic regression returns positive/negative depending on whether the logistic function is greater/smaller than a threshold, usually 0.5 by default. When you choose your threshold, you have a classifier. You have to choose one.

For a given choice of threshold, you can compute accuracy, which is the proportion of true positives and negatives in the whole data set.

AUC measures how true positive rate (recall) and false positive rate trade off, so in that sense it is already measuring something else. More importantly, AUC is not a function of threshold. It is an evaluation of the classifier as threshold varies over all possible values. It is in a sense a broader metric, testing the quality of the internal value that the classifier generates and then compares to a threshold. It is not testing the quality of a particular choice of threshold.

AUC has a different interpretation, and that is that it's also the probability that a randomly chosen positive example is ranked above a randomly chosen negative example, according to the classifier's internal value for the examples.

AUC is computable even if you have an algorithm that only produces a ranking on examples. AUC is not computable if you truly only have a black-box classifier, and not one with an internal threshold. These would usually dictate which of the two is even available to a problem at hand.

AUC is, I think, a more comprehensive measure, although applicable in fewer situations. It's not strictly better than accuracy; it's different. It depends in part on whether you care more about true positives, false negatives, etc.

F-measure is more like accuracy in the sense that it's a function of a classifier and its threshold setting. But it measures precision vs recall (true positive rate), which is not the same as either above.

I'd like to refer to how you should choose a performance measure.
Before that I'll refer to the specific question of accuracy and AUC.

As answered before, on imbalanced dataset using the majority run as a classifier will lead to high accuracy what will make it a misleading measure.
AUC aggregate over confidence threshold, for good and bad.
For good, you get a weight result for all confidence level.
The bad is that you are usually care only about the confidence level you will actually use and the rest are irrelevant.

However, I want to remark about choosing a proper performance measure for a model.
You should compare a model by its goal. The goal of a model is not a question os machine learning or statistic, in is question of the business domain and its needs.

If you are digging for gold (a scenario in which you have huge benefit from a true positive, not too high cost of a false positive) then recall is a good measure.

If you are trying to decide whether to perform a complex medical procedure on people (high cost of false positive, hopefully a low cost of false negative), precision is the measure you should use.

There are plenty of measures you can use.
You can also combine them in various ways.

However, there is no universal "best" measure.
There is the best model for your needs, the one that maximizing it will maximize your benefit.