the adaptica

Monday, May 29, 2006

Hebbian tutorial

There is a nice tutorial on anti-Hebbian learning over at Synaptic.

What should perhaps be added is that while novelty filters can detect new patterns very well, they can't say if the new patterns will have any significant impact or not.

Wednesday, May 10, 2006

A neural approach to the market

Business week has an article on a portfolio that Standard & Poor manages, the Neural Fair Value 25. What is interesting about it is that it is managed by a neural net.

Now, why would that be interesting - I mean, neural net stock market predictions have been around for years and they are an established technical analysis and decision support technique. All you need is some data and a good development environment for neural nets, and you are ready to go.

The interesting part here isn't in the methods used but who's using them. Given the market weight of S&P, the neural nets that they use and whose results they publish will unavoidably change the market and thus invalidating them. Predictive models only work when a majority is unaware of them. Once investors in general become aware of them, they will start using them and through that they will change the behaviour of the system. This in turn will destroy the models that are built up around historical data that represents a certain type of trading behaviour.

So your safest bet is not to invest in their Neural Fair Value portfolio. If it is as good as they claim it is, then it will surely bomb.

Adaptica Opens

This blog will cover current trends and developments in the field of adaptive systems (neural nets and similar stuff).