Machine Learning – Required Background for Applying ML to Finance

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I'm interested in machine learning in relations to the stock market (predicting future values of stocks etc).

What topics would I need to learn – e.g. what branch of AI to look into etc?
and what libraries/tools do I need?

Best Answer

Machine learning is a whole field in Computer Science, which is quite different from Artificial Intelligence.

Stanford provides a free online class for machine learning which will get you started.

You need to understand that machine learning alone will most probably not be sufficient to create good trading strategies; you need to understand well how the markets work and most systematic strategies require large enough capital to minimize the transaction costs (otherwise the strategy is not profitable, see implementation shortfall).

To be able to understand and apply machine learning, you'll also need a good mathematical background (the better it is, the deeper you can go with the algorithms). I would recommend Information Theory, Inference and Learning Algorithms (MacKay) as a reference book for the field.

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