Author archives: Peter White

The Bias/Variance Trade-off And The Limits of Machine Learning Models

Last update on Sept. 30, 2019.

Image Credit: pathdoc / Shutterstock.com

 

A Machine Learning model is a bit like a marriage - no matter how hard you try, it's never going to be perfect. The same way every marriage has its issues, so does every machine learning model. Real world data is like real world people: unpredictable. Real world events don’t conform precisely to a perfectly predictable pattern, so no matter how clever your algorithm, there will always be some irreducible error. The trick is to focus on the things you can change - the reducible error. If you’re in a marriage where there ...

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Outlier Detection: Border Security For Your Model

Last update on Sept. 2, 2019.

Image Credit:  zhu difeng / Shutterstock.com

 

You might not know it, but outlier detection is a big part of your life. The ability to notice  diseased or rotten food, or spot a person in a crowd who might be unstable or dangerous is a very important human skill. Many of us had extra detection-training as children

So can we reliably spot outliers? For extreme examples, we're pretty good. Say you ask 100 people, “what is the ideal indoor temperature?” and 99 of them answer, “somewhere between 16 and 22 degrees Celsius”, while the other ...

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The Zeta Coefficient – A New Way to Forecast Returns Using Risk

Last update on July 29, 2019.

Image Credit: Debby Wong / Shutterstock.com

Risk comes from not knowing what you’re doing

Warren Buffett

As far as superhuman powers go, the ability to accurately forecast returns probably wouldn't be many people's first choice. It's not as sexy as super speed or laser eyes. But, imagine the edge you'd have as an investor if you could look at an opportunity and predict the returns with precision. You would essentially remove all of the risk from investing: you'd be playing the game on easy mode!

Risk and returns are inter-twined. If you can assess risk accurately ...

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