Chapter 7: Machine Learning Models in Finance

Machine Learning in Finance

In Chapter Six, we examined a suite of statistical models that are commonly used in finance settings. In this chapter, we will turn our attention to machine learning models. As underscored in Chapter One, machine learning models can be categorized into supervised and unsupervised models. Supervised models learn about the predictable features of the target variable from a collection of input variables. Unsupervised models such as clustering models learn about common features that the input variables share and then use those features to group cases in the data. The insights or groups produced by unsupervised models are sometimes used as preliminary steps in predictive modeling. ...

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