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The acronym CHAID stands for Chi-squared Automatic Interaction Detector. It is one of the oldest tree classification methods originally proposed by Kass (1980). According to Ripley, 1996, the CHAID algorithm is a descendent of THAID developed by Morgan and Messenger, (1973). CHAID will "build" non-binary trees (i.e., trees where more than two branches can attach to a single root or node), based on a relatively simple algorithm that is particularly well suited for the analysis of larger datasets. Also, because the CHAID algorithm will often effectively yield many multi-way frequency tables (e.g., when classifying a categorical response variable with many categories, based on categorical predictors with many classes), it has been particularly popular in marketing research, in the context of market segmentation studies.
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