No abstract

In recent years, the problem of concept drift has gained importance in the financial domain. The succession of manias, panics and crashes have stressed the non-stationary nature and the likelihood of drastic structural or concept changes in the markets. Traditional systems are unable or slow to adapt to these changes. Ensemble-based systems are widely known for their good results predicting both cyclic and non-stationary data such as stock prices. In this work, we propose RCARF (Recurring Concepts Adaptive Random Forests), an ensemble tree-based online classifier that handles recurring concepts explicitly. The algorithm extends the capabilities of a version of Random Forest for evolving data streams, adding on top a mechanism to store and handle a shared collection of inactive trees, called concept history, which holds memories of the way market operators reacted in similar circumstances. This works in conjunction with a decision strategy that reacts to drift by replacing active trees with the best available alternative: either a previously stored tree from the concept history or a newly trained background tree. Both mechanisms are designed to provide fast reaction times and are thus applicable to high-frequency data. The experimental validation of the algorithm is based on the prediction of price movement directions one second ahead in the SPDR (Standard & Poor’s Depositary Receipts) S&P 500 Exchange-Traded Fund. RCARF is benchmarked against other popular methods from the incremental online machine learning literature and is able to achieve competitive results.

Stream Processing has recently become one of the current commercial trends to face huge amounts of data. However, normally these techniques need specific infrastructures and high resources in terms of memory and computing nodes. This paper shows how mini-batch techniques and topology extraction methods can help making gigabytes of data to be manageable for just one server using computationally costly Machine Learning techniques as Support Vector Machines. The algorithm iGNGSVM is proposed to improve the performance of Support Vector Machines in datasets where the data is continuously arriving. It is benchmarked against a mini-batch version of LibSVM, achieving good accuracy rates and performing faster than this.