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Hands-On Machine Learning for Algorithmic Trading

You're reading from   Hands-On Machine Learning for Algorithmic Trading Design and implement investment strategies based on smart algorithms that learn from data using Python

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Product type Paperback
Published in Dec 2018
Publisher Packt
ISBN-13 9781789346411
Length 684 pages
Edition 1st Edition
Languages
Concepts
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Authors (2):
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Jeffrey Yau Jeffrey Yau
Author Profile Icon Jeffrey Yau
Jeffrey Yau
Stefan Jansen Stefan Jansen
Author Profile Icon Stefan Jansen
Stefan Jansen
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Table of Contents (23) Chapters Close

Preface 1. Machine Learning for Trading FREE CHAPTER 2. Market and Fundamental Data 3. Alternative Data for Finance 4. Alpha Factor Research 5. Strategy Evaluation 6. The Machine Learning Process 7. Linear Models 8. Time Series Models 9. Bayesian Machine Learning 10. Decision Trees and Random Forests 11. Gradient Boosting Machines 12. Unsupervised Learning 13. Working with Text Data 14. Topic Modeling 15. Word Embeddings 16. Deep Learning 17. Convolutional Neural Networks 18. Recurrent Neural Networks 19. Autoencoders and Generative Adversarial Nets 20. Reinforcement Learning 21. Next Steps 22. Other Books You May Enjoy

Summary

In this chapter, we learned about a new class of models capable of capturing a non-linear relationship, in contrast to the classical linear models we had explored so far. We saw how decision trees learn rules to partition the feature space into regions that yield predictions and thus segment the input data into specific regions.

Decision trees are very useful because they provide unique insights into the relationships between features and target variables, and we saw how to visualize the sequence of decision rules encoded in the tree structure.

Unfortunately, a decision tree is prone to overfitting. We learned that ensemble models and the bootstrap aggregation method manages to overcome some of the shortcomings of decision trees and render them useful, as components of much more powerful composite models.

In the next chapter, we will explore another ensemble model, which...

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