Book Image

Hands-On Machine Learning for Algorithmic Trading

By : Stefan Jansen
Book Image

Hands-On Machine Learning for Algorithmic Trading

By: Stefan Jansen

Overview of this book

The explosive growth of digital data has boosted the demand for expertise in trading strategies that use machine learning (ML). This book enables you to use a broad range of supervised and unsupervised algorithms to extract signals from a wide variety of data sources and create powerful investment strategies. This book shows how to access market, fundamental, and alternative data via API or web scraping and offers a framework to evaluate alternative data. You’ll practice the ML work?ow from model design, loss metric definition, and parameter tuning to performance evaluation in a time series context. You will understand ML algorithms such as Bayesian and ensemble methods and manifold learning, and will know how to train and tune these models using pandas, statsmodels, sklearn, PyMC3, xgboost, lightgbm, and catboost. This book also teaches you how to extract features from text data using spaCy, classify news and assign sentiment scores, and to use gensim to model topics and learn word embeddings from financial reports. You will also build and evaluate neural networks, including RNNs and CNNs, using Keras and PyTorch to exploit unstructured data for sophisticated strategies. Finally, you will apply transfer learning to satellite images to predict economic activity and use reinforcement learning to build agents that learn to trade in the OpenAI Gym.
Table of Contents (23 chapters)

Summary

This chapter started with how word embeddings encode semantics for individual tokens more effectively than the bag-of-words model that we used in Chapter 13, Working with Text Data. We also saw how to evaluated embedding by validating if semantic relationships among words are properly represented using linear vector arithmetic.

To learn word embeddings, we use shallow neural networks that used to be slow to train at the scale of web data containing billions of tokens. The word2vec model combines several algorithmic innovations to dramatically speed up training and has established a new standard for text feature generation. We saw how to use pretrained word vectors using spaCy and gensim, and learned to train our own word vector embeddings. We then applied a word2vec model to SEC filings. Finally, we covered the doc2vec extension that learns vector representations for documents...