Professional Documents
Culture Documents
Robert J. Yan
Charles X. Ling
University of Western Ontario, Canada
{jyan, cling}@csd.uwo.ca
1
Outline
Introduction
The stock selection task
The Prototype Ranking method
Experimental results
Conclusions
2
Introduction
Objective:
– Use machine learning to select a small number
of “good” stocks to form a portfolio
Research questions:
– Learning in the noisy dataset
– Learning in the imbalanced dataset
Our solution: Prototype Ranking
– A specially designed machine learning method
3
Outline
Introduction
The stock selection task
The Prototype Ranking method
Experimental results
Conclusions
4
Stock Selection Task
Given information prior to week t, predict
performance of stocks of week t
– Training set
5
Outline
Introduction
The stock selection task
The Prototype Ranking method
Experimental results
Conclusions
6
Prototype Ranking
The PR System
Step 1. Find good “prototypes” in training data
Step 2. Use k-NN on prototypes to rank test data
7
Step 1: Finding Prototypes
Prototypes: representative points
– Goal: discover the underlying
density/clusters of the training
samples by distributing
prototypes in sample
space
– Reduce data size
prototypes samples
prototype
neighborhood 8
Finding prototypes using competitive learning
10
Modifications for Stock data
11
Step 2: Predicting Test Data
The weighted average of k nearest prototypes
Online update the model with new data
12
Outline
Introduction
The stock selection task
The Prototype Ranking method
Experimental results
Conclusions
13
Data
CRSP daily stock database
– 300 NYSE and AMEX stocks, largest market cap
– From 1962 to 2004
14
Testing PR
15
Results of Experiment 1
1.8
1.6
Weekly Average
1.4
Return (%)
1.2
1
Average 0.8
0.6
Return 0.4
0.2
(1978-2004) 0
0 10 20 30 40 50 60 70 80 90 100 110
Stock Number in Portfolio
5
Weekly Std.(%)
4.5
4
Risk (std)
3.5
(1978-2004) 3
2.5
2
0 10 20 30 40 50 60 70 80 90 100 110
17
Results of Experiment 2
Measures:
Average Return (Ret.)
Sharpe Ratio (SR): a risk-adjusted return: SR= Ret. / Std.
1.6
1.4
1.2
1
0.8 PR 10-stock portfolio
CP 10-stock portfolio
0.6
0.4
0.2
0 18
Ret.(%) SR
Outline
Introduction
The stock selection task
The Prototype Ranking method
Experimental results
Conclusions
20
Conclusions
PR: modified competitive learning and k-NN
for noisy and imbalanced stock data
PR does well in stock selection
– Larger portfolio, lower return, lower risk
– PR outperforms the non-ML method CP
Future work: use it to invest and make money!
21