Author : Marcos M. López de Prado
Publisher : Cambridge University Press
ISBN 13 : 1108879721
Total Pages : 152 pages
Book Rating : 4.1/5 (88 download)
Book Synopsis Machine Learning for Asset Managers by : Marcos M. López de Prado
Download or read book Machine Learning for Asset Managers written by Marcos M. López de Prado and published by Cambridge University Press. This book was released on 2020-04-22 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt: Successful investment strategies are specific implementations of general theories. An investment strategy that lacks a theoretical justification is likely to be false. Hence, an asset manager should concentrate her efforts on developing a theory rather than on backtesting potential trading rules. The purpose of this Element is to introduce machine learning (ML) tools that can help asset managers discover economic and financial theories. ML is not a black box, and it does not necessarily overfit. ML tools complement rather than replace the classical statistical methods. Some of ML's strengths include (1) a focus on out-of-sample predictability over variance adjudication; (2) the use of computational methods to avoid relying on (potentially unrealistic) assumptions; (3) the ability to "learn" complex specifications, including nonlinear, hierarchical, and noncontinuous interaction effects in a high-dimensional space; and (4) the ability to disentangle the variable search from the specification search, robust to multicollinearity and other substitution effects.