Hands-On Machine Learning for Algorithmic Trading

Model definition – Bayesian logistic regression

As discussed in Chapter 6, Machine Learning Workflow, logistic regression estimates a linear relationship between a set of features and a binary outcome, which is mediated by a sigmoid function to ensure that the model produces probabilities. The frequentist approach resulted in point estimates for the parameters that measure the influence of each feature on the probability that a data point belongs to the positive class, with confidence intervals based on assumptions about the parameter distribution.

In contrast, Bayesian logistic regression estimates the posterior distribution over the parameters itself. The posterior allows for more robust estimates of what is called a Bayesian credible interval ...