CS计算机代考程序代写 algorithm decision tree python Machine Learning for Financial Data

Machine Learning for Financial Data
January 2021
CLASSIFICATION (CONCEPTS – PART 1)

Contents
◦ The Iris Dataset
◦ Training & Testing Data Partitioning
◦ Evaluation by Accuracy Score
◦ k-Nearest Neighbours Classifier
◦ Decision Tree Classifier
Copyright (c) by Daniel K.C. Chan. All Rights Reserved. 2
Classification

The Iris Dataset

The Iris dataset has a long, rich history in machine learning and statistics
▪ Each row describes one iris in terms of the length and width of that flower’s sepals and petals
▪ Those are the big flowery parts and little flowery parts
▪ There are four measurements per iris
▪ Each of the measurements is a length of one
aspect of that iris
▪ The final column, the classification target, is the particular species – one of three – of that iris: setosa, versicolor, or virginica
Copyright (c) by Daniel K.C. Chan. All Rights Reserved. 4
Classification

The prediction is to choose 1 out of 3 species meaning that the target variable is categorical with 3 possible values
IRIS SETOSA IRIS VERSICOLOR IRIS VIRGINICA
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Classification

Observations & features
▪ All measurements are recorded as float in cm
▪ The target can be one of three classes that are encoded as follows:
▪ 0 = setosa
▪ 1 = versicolor ▪ 2 = virginica
▪ Altogether 150 observations, 50 for each class
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Classification

Python: Basic Settings
# import the plotting module and binds it to the name “plt” # display all warnings
import matplotlib.pyplot as plt import warnings
%matplotlib inline
%config InlineBackend.figure_format = ‘retina’
# display the output of plotting commands inline
# use the “retina” display mode, i.e. to render higher resolution images
# customize the display style
# set the dots per inch (dpi) from the default 100 to 300 # suppress warnings related to future versions
plt.style.use(‘seaborn’)
plt.rcParams[‘figure.dpi’] = 300 warnings.simplefilter(action=’ignore’, category=FutureWarning)
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Classification

Python: Understanding the Iris Dataset (1)
# import the relevant modules
import pandas as pd
import seaborn as sns
from sklearn import datasets
iris = datasets.load_iris()
data = pd.DataFrame(iris.data, columns=iris.feature_names)
data[‘target’] = iris.target
data[‘target’] = data[‘target’].astype(‘category’).cat.rename_categories(iris.target_names)
# load the Iris dataset
# https://scikit-learn.org/stable/modules/generated/sklearn.datasets.load_iris.html
# create a dataframe from the feature values and names
# set the dataframe target column with the target values of the dataset
# display the data shown earlier
data.head(15)
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Classification

Python: Understanding the Iris Dataset (2)
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Classification

Python: Understanding the Iris Dataset (3)
# plot a histogram for each feature # hist() plots the whole dataset
data.hist(bins=50, figsize=(20,15))
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Classification

Python: Understanding the Iris Dataset (4)
# draw a pairs plot to show
# (1) the distribution of single variables
# (2) relationships between two variables
# https://seaborn.pydata.org/generated/seaborn.pairplot.html # specify the feature to color using “hue”
sns.pairplot(data, hue=’target’, size=1.5)
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Classification

Training & Testing Data Partitioning

Teaching to the test is usually regarded as a bad thing
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▪ The goal of machine learning is to do well
on unseen observations
▪ Performance on unseen observations is
called generalization
▪ If an ML model is tested on data that have already been seen, an overinflated estimate of its abilities on novel data
will result, i.e. overfitting Classification

Python: Partitioning the Dataset
# load relevant modules
from sklearn.model_selection import train_test_split
# partition dataset into training data and testing data
# https://scikit-learn.org/stable/modules/generated/sklearn.model_selection.train_test_split.html # (1) separate the features from the target by dropping and projecting a column
# (2) specify the proportion of the testing dataset (30%)
# (3) control the shuffling using a seed (i.e. 0) to ensure reproducible output
X_train, X_test, y_train, y_test = train_test_split(
data.drop(‘target’, axis = 1), data[‘target’], test_size = 0.3, random_state = 0)
# display the number of rows and columns
print(“Training data shape: “, X_train.shape) print(“Testing data shape: “, X_test.shape)
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Classification

Evaluation by Accuracy Score

Python: Evaluation by Accuracy Score
# load relevant modules
import numpy as np
from sklearn.metrics import accuracy_score
y_t = np.array([True, True, False, True]) ys = np.array([True, True, True, True])
# for illustration purpose only
# build an array containing the correct answers and another array for the ML model results
# calculate the accuracy score using scikit-learn built-in function
# https://scikit-learn.org/stable/modules/generated/sklearn.metrics.accuracy_score.html # it is the number of correct answers over the total number of answers
print(“sklearn accuracy:”, accuracy_score(y_t, ys))
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Classification
𝐴𝑐𝑐𝑢𝑟𝑎𝑐𝑦 = 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐶𝑜𝑟𝑟𝑟𝑒𝑐𝑡 𝐴𝑛𝑠𝑤𝑒𝑟𝑠 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐴𝑛𝑠𝑤𝑒𝑟𝑠

k-Nearest Neighbours (k-NN) Classifier

k-NN prediction is based on the nearest neighbours
The 10 nearest neighbours are
prediction is obvious all setosa
prediction is not so obvious
The nearest neighbours are not of the same type
Copyright (c) by Daniel K.C. Chan. All Rights Reserved.
19
Classification

Prediction over a labelled dataset can be made by taking the classification of the nearest k neighbours
▪ Key ideas behind the nearest neighbours algorithms
▪ Find a way to describe the similarity of two different observations
▪ When a prediction on a new observation is needed, simply take the value from the most similar know observation
▪ The ideas can be generalised by taking values from several neighbours and combine their values to generate the prediction
▪ Common numbers for neighbours are 1, 3, 10, 20, …
▪ The optimal number is typically obtained through Grid Search
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Classification

Distances to neighbours & how to combine them?
▪ One way to measure similarity is the distance between two observations in the multi- dimensional feature space
▪ neighbors.DistanceMetric in the scikit-learn module has defined some 20 metrics
▪ The values from the nearest neighbours can be combined by taking the most frequent value as the prediction
https://scikit-learn.org/stable/modules/generated/sklearn.neighbors.DistanceMetric.html
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Classification

Minkowski distance measures that are positive, symmetric and satisfying the triangle inequality are distance metrics
▪ Euclidean (numeric features) 𝐷(𝑣, 𝑣′) = σ𝑑 𝑣 − 𝑣′ 2 𝑖=1𝑖 𝑖
▪ symmetric, spherical, treats all dimensions equally ▪ sensitive to extreme differences in a single feature
▪ Hamming (categorical features) 𝐷(𝑣, 𝑣′) = σ𝑑 1 ′ 𝑖=1 𝑣𝑖≠𝑣 𝑖
▪ counting – distance is 1 if two categorical feature values are not the same; otherwise, 0
▪ Minkowski (numeric features, 𝐿 norm distance) 𝐷 𝑣, 𝑣′ = 𝑝 σ𝑑 𝑣 − 𝑣′ 𝑝
▪ A metric satisfies
▪ Positivity: 𝐷 𝑣,𝑣′ > 0if𝑖 ≠ 𝑗and𝐷 𝑣,𝑣
▪ Symmetry: 𝐷 𝑣,𝑣′ = 𝐷 𝑣′,𝑣
▪ TriangleInequality:𝐷 𝑣,𝑣′ ≤𝐷 𝑣,𝑝 +𝐷 𝑝,𝑣′
𝑝
𝑖=1𝑖 𝑖
= 0
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Classification
Recall the use of L1 norm and L2 norm distance metrics in Scaling Feature Vector to Unit Vector.

Changing the order parameter generates different distance metrics including other commonly used metrics
p=2−2 =0.25 p=2−1.5 =0.3544
P=2−1 =0.5
P=2−0.5 =0.707 P=20 =1
p=20.5 =1.414 p=21 =2
p=21.5 =2.828
p=22 =4
p=2∞ =∞
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23
Classification Introduction

The choice of p determines the impact of value change in different feature dimensions to the distance metric
feature 2
p = 0.7
D & C are the same distance away from A even though the difference in feature 2 is large, less sensitive to change in a single dimension
p = 20 = 1
p = 2−0.5 = 0.707 p=2−1 =0.5
p = 2−1.5 = 0.3544
p = 21.5 = 2.828 p = 21 = 2
p = 20.5 = 1.414
feature 1
isoline
0
d2 d1
p=2
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24
Classification
B & C are the same distance away from A, D is farther away, sensitive to change in a single dimension

Like all other ML models, a k-NN model needs to be trained, tested, and evaluated against a hold-out dataset
k-NN model
training
trained k-NN model
prediction
evaluation
performance
results
training data
testing features
testing targets
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25
Classification

Python: Fitting a k-NN model and Making Prediction with it
# load relevant modules
from sklearn.neighbors import KNeighborsClassifier
# instantiate a 3-NN classifier
# https://scikit-learn.org/stable/modules/generated/sklearn.neighbors.KNeighborsClassifier.html # instantiate a 3-NN classifier
knn = KNeighborsClassifier(n_neighbors=3, metric=’minkowski’) # fit/train the classifier to the training dataset
model = knn.fit(X_train, y_train)
# predict the targets for the test features
test_t = model.predict(X_test)
# calculate the accuracy score for the predicted targets using the known targets
print(“3NN accuracy:”, accuracy_score(y_test, test_t)) Copyright (c) by Daniel K.C. Chan. All Rights Reserved. 26
Classification

k-NN is non-parametric and has hyperparameters
▪ k-NN is a non-parametric model
▪ Unlike many other models, k-NN outputs (the predictions) cannot be computed from an
input example and the values of a small, fixed set of data
▪ All of the training data is required to figure out the output value
▪ Throwing out just one of the training data, which might be the nearest neighbor of a new test data, will affect the output
▪ The 3 in the k-NN model is not something that is adjusted by the k-NN training process but a hyperparameter
▪ Adjusting a hyperparameter involves conceptually, and literally, working outside the learning box of model training
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Classification

k-NN Model is simple to understand and implement
1
2
3
4
5
6
7
8
Property
Feature Data Types
Target Data Types
Key Principles
Hyperparameters
Data Assumptions
Performance
Accuracy
Explainability
Description
Scale data. Variable encoding is therefore necessary for categorical data.
Nominal data including binary. Representing class membership.
An object is classified by a plurality vote of its neighbors, with the object being assigned to the class most common among its k nearest neighbors
Number of neighbours (k). The best choice of k depends upon the data; generally, larger values
of k reduces effect of the noise, but make boundaries between classes less distinct (high bias). In binary classification, k should be an odd number to avoid tied votes. Use k-fold (this k is the not same k in k-NN) cross validation to select k. Distance metric (Python default: Minkowski).
Non-parametric – no assumption about data distribution. All data are used.
Instance-based/Lazy learning, where the prediction is only approximated locally and all computation is deferred until prediction evaluation. No model per se is built. No training is therefore required. Model building is therefore quick but scoring becomes slower.
Can be severely degraded by the presence of noisy or irrelevant features, or if the feature scales are not consistent with their importance. Feature scaling is recommended. Imbalanced data should be avoided.
Poor.
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Classification

Decision Tree Classifiers

Decision tree partitions the sample space to form regions that can be captured as decision rules
prediction is obvious
prediction is not so obvious
sample space
portioning sample space facilitates building prediction rules
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Classification

Nodes in a decision tree make splitting decision on which sub-tree to explore next until reaching a leaf node
Root Node / The Root
Internal
Nodes / Children Nodes of the Root Node
Leaf Nodes / Leaves
depth 1
depth 2 True
False
Decision with splitting condition
Number of data over which the decision is applied
Number of data in each category over which the decision is applied
Predicted category Gini impurity score
𝑛
𝐺𝑖 =1−෍𝑝𝑖,𝑘2 𝑘=1
where
𝐺𝑖 is the Gini impurity score for node i 𝑛 is the number of categories
𝑝𝑖,𝑘 is the ratio of k instances among all the data covered at node i
Copyright (c) by Daniel K.C. Chan. All Rights Reserved.
31
Classification

Gini impurity is a measure of misclassification that is applicable in a multiclass classifier context
50 0
𝐺2 = 1 − (50)2−(50)2−(50)2
= 1 − (1)2−(0)2−(0)2 = 1 − 1 − 0. −0
= 0.0
i = 2
0
i=1
i = 3
The Gini impurity score decreases as the depth increases
implying the gradual reduction
in the likelihood of
incorrect classification.
𝐺4 =1−(0)2−(49)2−(5)2 54 54 54
i=4 True
False
i=5
Ideally, the Gini impurity score for the leaf nodes should be zero.
𝐺5 =1−(0)2−(1)2−(45)2 46 46 46
= 1 − (0)2−(0.0217)2−(0.9783)2 = 1 − 0 − 0.0005 − 0.9570
= 0.0425
= 1 − (0)2−(0.9074)2−(0.0926)2
= 1 − 0 − 0.8234 − 0.0086
= 0.1680
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32
Classification

Petal length alone is enough to separate Iris-setosa while narrower petal width isolates Iris-versicolor
petal length petal width
IRIS SETOSA IRIS VERSICOLOR
IRIS VIRGINICA
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Classification

The leaf node provides a predicted classification as well as the probability of the prediction
petal length
petal width
1.5cm 5cm
Probability of being an Iris-setosa: 0 = 0%
54
Iris-versicolor: 49 = 90.7% 54
Iris-virginica: 5 = 9.3% 54
True
False
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34
Classification

The growth of the tree is determined by the purity of the
branches
If the maximum depth were set at 3, the two impure branches would be further split along the dotted lines generating purer branches
The two branches split at depth 1 remains impure and can be further split. Since the maximum depth is set at 2, the model stops here
This region is pure and cannot be split anymore
IRIS SETOSA probability: 100%
Depth=0
IRIS VIRGINICA
Depth=1
probability: 97.8%
IRIS VERSICOLOR
probability: 90.7%
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Classification

The best split for a decision tree node is chosen by minimizing the impurity of the branches
▪ Gini Impurity is the probability of incorrectly classifying a randomly chosen element in the dataset if it were randomly labeled according to the class distribution
▪ It can be interpreted as a probabilistic measure stating the homogeneity of the random labelling of a dataset according to the class distribution
𝑛
𝐺𝑖 =1−෍𝑝𝑖,𝑘2
𝑘=1
▪ 𝐺𝑖 is the Gini impurity score for node i
▪ 𝑛 is the number of categories
▪ 𝑝𝑖,𝑘 is the ratio of k instances among all the data covered at node i
▪ The best split is chosen by maximizing the Gini Gain, which is calculated by subtracting the weighted impurities of the branches from the original impurity.
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Classification

Gini impurity is a measure of “information”, “surprise”, or “uncertainty” inherent in the features’ possible outcomes
Gini Impurity
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Classification
In the building of a decision tree, the growth of the tree is to reduce uncertainty by maximizing the homogeneity within each branches

Decision trees are learned by recursive partitioning via selecting splitting features and branching by feature values
▪ Growth Termination – the growth of a tree node is determined by the observations corresponding to the node (i.e. the observation set) and will terminate when
▪ All observations in the observation set are of the same class – a pure partition
▪ Number of observations in the observation set is less than a specified minimum
▪ Depth of the current node is greater than a specified maximum
▪ The improvement of class impurity for the best available split of the node’s observation set is less than a specified minimum (i.e. when splitting adds little value to the prediction)
▪ Node Prediction – class of the most frequent feature in the observations set is assigned as the prediction of the node
▪ Split Selection – for each feature, identify a list of candidate split values and then calculate the impurity measure for each split, weight each impurity measure with the relative size of each split, sum the weighted impurity measures, and select the feature
with the lowest sum of weighted impurity measures and the corresponding split value Copyright (c) by Daniel K.C. Chan. All Rights Reserved. 38
Classification

Selection Measure
▪ One for each candidate feature
▪ Based on the size & Gini impurity score of all the splits of the feature
▪ The feature with the lowest impurity measure is selected
▪ The split of the selected feature with the least Gini impurity will become the node’s splitting value
Petal Length
1.6
2.45
4.8
6.9
Setosa
44
6
0
0
Versicolor
0
0
46
4
Virginica
0
0
3
47
All
44
6
49
51
Node Size
150
(Setosa/All)2
1.0
1.0
0.0
0.0
(Versicolor/All)2
0.0
0.0
0.881
0.006
(Virginica/All)2
0.0
0.0
0.004
0.849
Gini impurity
0.0
0.0
0.115
0.145
All/Node Size
0.293
0.040
0.327
0.340
Weighted Gini
0.0
0.0
0.038
0.049
Selection Measure
0.087
Sepal Length
5.1
5.8
6.5
7.9
Setosa
36
14
0
0
Versicolor
4
20
18
8
Virginica
1
5
22
22
All
41
39
40
30
Node Size
150
(Setosa/All)2
0.771
0.129
0.0
0.0
(Versicolor/All)2
0.010
0.263
0.203
0.071
(Virginica/All)2
0.001
0.010
0.303
0.538
Gini impurity
0.219
0.592
0.495
0.391
All/Node Size
0.273
0.260
0.267
0.20
Weighted Gini
0.060
0.154
0.132
0.078
Selection Measure
0.424
Sepal Width
2.8
3.0
3.3
4.4
Setosa
1
7
11
31
Versicolor
27
15
7
1
Virginica
19
14
12
5
All
47
36
30
37
Node Size
150
(Setosa/All)2
0.0
0.038
0.134
0.702
(Versicolor/All)2
0.330
0.174
0.054
0.001
(Virginica/All)2
0.163
0.151
0.160
0.018
Gini impurity
0.506
0.637
0.651
0.279
All/Node Size
0.313
0.240
0.200
0.247
Weighted Gini
0.159
0.153
0.130
0.069
Selection Measure
0.511
Petal Width
0.3
1.4
1.75
2.5
Setosa
41
9
0
0
Versicolor
0
35
14
1
Virginica
0
1
4
45
All
41
45
18
46
Node Size
150
(Setosa/All)2
1.0
0.040
0.0
0.0
(Versicolor/All)2
0.0
0.605
0.605
0.0
(Virginica/All)2
0.0
0.0
0.049
0.957
Gini impurity
0.0
0.355
0.345
0.043
All/Node Size
0.273
0.300
0.120
0.307
Weighted Gini
0.0
0.100
0.041
0.013
Selection Measure
0.161
Copyright (c) by Daniel K.C. Chan. All Rights Reserved. 39
Classification

The selection measure with the least value determines from which node the decision tree will grow for the next level
▪ The selection of a splitting criterion is based the sum of the weighted gini
impurity of each factor
𝑛 𝑆𝑖
𝐼 𝑆 = ෍ 𝑆 ∙ 𝐼 𝑆𝑖
𝑖=1
▪ The dataset covered by the node is to be partitioned into a number of data subsets 𝑆𝑖 based on some proposed splitting criteria
▪ 𝐼(𝑆𝑖) is the gini impurity index of the proposed data subset 𝑆𝑖 ▪ 𝑆 represents the cardinality of the original dataset 𝑆
▪ 𝑆𝑖 represents the cardinality of the proposed data subset 𝑆𝑖
▪ The splitting criteria with the least 𝐼 𝑆 is to be selected to grow the next level of branches for the decision tree
Copyright (c) by Daniel K.C. Chan. All Rights Reserved. 40
Classification

Python: Decision Tree Classifier
# load relevant modules
from sklearn.model_selection import cross_val_score from sklearn.tree import DecisionTreeClassifier
# instantiate a decision tree classifier
# https://scikit-learn.org/stable/modules/generated/sklearn.tree.DecisionTreeClassifier.html
# evaluate the model using cross validation
# https://scikit-learn.org/stable/modules/generated/sklearn.model_selection.cross_val_score.html # specify the cross validation to be a 3 folds cross validation
# specify the “accuracy” metric to be the model evaluation metric
# https://scikit-learn.org/stable/modules/model_evaluation.html#scoring-parameter
dtc = DecisionTreeClassifier()
cross_val_score(dtc, data.drop(‘target’,axis=1), data[‘target’], cv=3, scoring=’accuracy’)
Copyright (c) by Daniel K.C. Chan. All Rights Reserved. 41
Classification

Python: Decision Tree Classifier – Using Only Two Features
# load relevant modules
from sklearn.model_selection import cross_val_score from sklearn.tree import DecisionTreeClassifier
# project two features, petal length and petal width, to predict the Iris species
# https://scikit-learn.org/stable/modules/generated/sklearn.tree.DecisionTreeClassifier.html
# evaluate the model using cross validation
# https://scikit-learn.org/stable/modules/generated/sklearn.model_selection.cross_val_score.html
X = iris.data[:,2:] y = iris.target
dtc = DecisionTreeClassifier(max_depth=2)
# instantiate a decision tree classifier
# https://scikit-learn.org/stable/modules/generated/sklearn.tree.DecisionTreeClassifier.html
Copyright (c) by Daniel K.C. Chan. All Rights Reserved. 42
Classification

Python: Decision Tree Classifier – Performance
# Perform cross-validation by dividing the training data into 3 datasets # Use accuracy as the performance score
scores = cross_val_score(dtc, data.drop(‘target’,axis=1), data[‘target’], cv=3,
scoring=’accuracy’)
print(scores) print(scores.mean())
# Fit the classifier with the training dataset
dtc.fit(X, y)
# Display the score for each cross validation
# Display the average score for the 3 cross validation
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Classification

Python: Decision Tree Classifier – Show the Decision Tree
# import drawing libraries
from sklearn import tree
from matplotlib.pyplot as plt
# show attributes related to the dataset
print(iris.feature_names[2:]) print(iris.target_names) print(data.columns) print(data.target.nunique()) print(data.target.unique()) data.shape
# display the decision tree
tree.plot_tree(dtc);
Copyright (c) by Daniel K.C. Chan. All Rights Reserved. 44
Classification

Python: Decision Tree Classifier – Show Majority Classes
# [‘petal length (cm)’,’petal width (cm)’]
fn = iris.feature_names[2:] # [‘setosa’, ‘versicolor’, ‘virginica’]
cn = iris.target_names
# paint nodes to indicate majority class
fig, axes = plt.subplots( nrows=1, ncols=1,
figsize=(4,4), dpi=300) tree.plot_tree(dtc,
feature_names=fn, class_names=cn, filled=True);
Copyright (c) by Daniel K.C. Chan. All Rights Reserved. 45
Classification

Decision Trees are greedy, top-down, recursive partitioning techniques
1
2
3
4
5
6
7
8
Property
Feature Data Types
Target Data Types
Key Principles
Hyperparameters
Data Assumptions
Performance
Accuracy
Explainability
Description
Both categorical and numerical data.
Categorical – class membership.
Feature is selected based on having a value that can provide the purest branches based on the impurity measure. Recursively partition nodes to branches until the leaf nodes are pure or the depth of tree is reached. Optimisation is performed at node level and not at the tree level.
Impurity measure (Gini impurity measure or Entropy measure). Depth of tree. Regularization parameters (e.g. minimum number of observations at each node, maximum number of leaf nodes) are used to reduce the risk of overfitting as the training is highly unconstrained.
Non-parametric. Very little data preparation. No feature scaling or centering is required.
Implicit feature selection. Can be unstable because small variance in the data.
Greedy approach relies on local optimisation and cannot guarantee to return the globally optimal decision tree (which is NP-complete).
Comprehensive explanation.
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Classification

References

References
“Hands-On Machine Learning with Scikit- Learn and TensorFlow”, Aurelien Geron, O’Reilly Media, Inc., 2017
“Thoughtful Machine Learning with Python”, Matthew Kirk, O’Reilly Media, Inc., 2017
Copyright (c) by Daniel K.C. Chan. All Rights Reserved.
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References
▪ “IntroductiontoMachineLearning”(https://tomaszgolan.github.io/introduction_to_machine_learning/)
▪ Iris dataset (https://scikit-learn.org/stable/modules/generated/sklearn.datasets.load_iris.html)
▪ “ExploratoryDataAnalysisofIRISDataSetUsingPython”,VenkataSaiRaddyAvuluri,2019 (https://medium.com/@avulurivenkatasaireddy/exploratory-data-analysis-of-iris-data-set-using-python-823e54110d2d)
▪ “ProfilingandTimingCode”,JakeVanderPlas,2016(https://jakevdp.github.io/PythonDataScienceHandbook/01.07- timing-and-profiling.html)
▪ “Construction of Decision Tree: Attribute Selection Measures”, R. Aruna Devi & K. Mirmala, International Journal of Advancements in Research & Technology, Vol. 2, Issue 4, 2013 (http://www.ijoart.org/docs/Construction-of-Decision- Tree–Attribute-Selection-Measures.pdf)
Copyright (c) by Daniel K.C. Chan. All Rights Reserved. 49
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THANK YOU