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The week's question
In March 2025, in the thread "Re: OT, out", Umm asked the members: "Do you think it is because America is made up of magical soil that makes businesses based in America magically profitable?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Investment Strategies / Mechanical Investing
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Author: anchak   😊 😞
Number: of 6243 
Subject: Re: ML for MI question
Date: 07/31/24 11:11 AM
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Hello there tedthedog ..... Great thoughts and questions!

Also lizgdal ..... Thanks for the list ... its interesting.

A couple of comments : QUOTE : "because LLMs aren't great with numbers/arithmetic" ENDQUOTE

This statement is misguided - actually all "AI/ML" tools in the end are numerical encoded ( ie binary/continuous) - LLMs or Generative AI is based on CNNs ( Convolution Neural Networks) and NNs cant handle anything other than numeric data at the final processing end. What's happening in the intermediate is how they have tokenized the text/image components etc - which might lead you to believe that categorization is the way to go.

However this is the fundamental truth in all machine algorithms - Numeric to Categorization = Loss of Fidelity/Info - ie you are ALWAYS better off to feed in the original numerical values ( Unless in some extreme cases where the information is full of noise and a human expert can make better sense)

NET : There's no need to recode Numeric data into arbitrary categories to feed into MLs. The main thing to remember about such numeric data is that algos will naturally attribute a distance metric to the underlying data and for any reason the data is actually ordinal ( ie the values are ordered but the difference between is not representative) - you are better of using those as Factors ( eg say Zacks Rank or Value Line Score etc)

Where LLMs can potentially be useful - since they are basically a "complete the sentence/thought" is to use text/language inputs like Twitter/Reddit/Filings commentary etc to see whether the LLMs produce better extracted features from them - which can then be processed as factors

If you read some of the good books on Deep Learners - you will see that the authors (Definitely Hinton's school of thought/disciples) self-admit that its only in the "interpretative class" of problems like Image/Text/Thought etc where Deep Learners are useful. Numerical problems are typically better handled thru what I tend to refer as the "Stat-MLs" ie RandomForest and Boosters ( XGB,LGBM,CatBoost etc) or SVMs ( if you have a 2 class problem) etc

One novel use of CNNs could be to feed actually say Stockcharts images of Stock History and try to predict the future forward - ie total pattern classification. [Basically what all the CandleStick etc try to do with numerical rules] - Very likely will only help to prove the futility of things.

But there's a lot of attempts to use LSTM ( a specific class of generative learners) to do this in a numerical input way.

The list of the variables tried tells the story by itself:

(a) Majority of the variables are ANNUAL - which almost means the outcome of the stock performance is 1+-2 years out
(b) One of the key attributes of MLs is the "learning" capability - if data is not getting updated the model is stale
(c)Otherwise - this sort of an exercise boils down to

"Let me see if there's some SUPER COMPLEX non-linear representation which can fit the data I am feeding which can beat a simpler model". The outcomes of these become obvious - they wont generalize going forward typically and its just an extreme case of Data Mining

Hope this helps!
Best
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This community has written 6,227 posts about Mechanical Investing. The article-length ones it recommended most:
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