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Machine Learning for Finance

You're reading from   Machine Learning for Finance Principles and practice for financial insiders

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Product type Paperback
Published in May 2019
Publisher Packt
ISBN-13 9781789136364
Length 456 pages
Edition 1st Edition
Languages
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Authors (2):
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Jannes Klaas Jannes Klaas
Author Profile Icon Jannes Klaas
Jannes Klaas
James Le James Le
Author Profile Icon James Le
James Le
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Table of Contents (15) Chapters Close

Machine Learning for Finance
Contributors
Preface
Other Books You May Enjoy
1. Neural Networks and Gradient-Based Optimization 2. Applying Machine Learning to Structured Data FREE CHAPTER 3. Utilizing Computer Vision 4. Understanding Time Series 5. Parsing Textual Data with Natural Language Processing 6. Using Generative Models 7. Reinforcement Learning for Financial Markets 8. Privacy, Debugging, and Launching Your Products 9. Fighting Bias 10. Bayesian Inference and Probabilistic Programming Index

Sources of unfairness in machine learning


As we have discussed many times throughout this book, models are a function of the data that they are trained on. Generally speaking, more data will lead to smaller errors. So, by definition, there is less data on minority groups, simply because there are fewer people in those groups.

This disparate sample size can lead to worse model performance for the minority group. As a result, this increased error is often known as a systematic error. The model might have to overfit the majority group data so that the relationships it found do not apply to the minority group data. Since there is little minority group data, this is not punished as much.

Imagine you are training a credit scoring model, and the clear majority of your data comes from people living in lower Manhattan, and a small minority of it comes from people living in rural areas. Manhattan housing is much more expensive, so the model might learn that you need a very high income to buy an apartment...

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