Principal Components Regression, Pt. 3: Picking the Number of Components

Posted on Categories Mathematics, Practical Data Science, Pragmatic Data Science, Pragmatic Machine Learning, StatisticsTags , , , , 1 Comment on Principal Components Regression, Pt. 3: Picking the Number of Components

In our previous note we demonstrated Y-Aware PCA and other y-aware approaches to dimensionality reduction in a predictive modeling context, specifically Principal Components Regression (PCR). For our examples, we selected the appropriate number of principal components by eye. In this note, we will look at ways to select the appropriate number of principal components in a more automated fashion.

Continue reading Principal Components Regression, Pt. 3: Picking the Number of Components

A bit on the F1 score floor

Posted on Categories Mathematics, Opinion, Pragmatic Data Science, Pragmatic Machine Learning, Statistics, TutorialsTags , , , ,

At Strata+Hadoop World “R Day” Tutorial, Tuesday, March 29 2016, San Jose, California we spent some time on classifier measures derived from the so-called “confusion matrix.”

We repeated our usual admonition to not use “accuracy itself” as a project quality goal (business people tend to ask for it as it is the word they are most familiar with, but it usually isn’t what they really want).

One reason not to use accuracy: an example where a classifier that does nothing is “more accurate” than one that actually has some utility. (Figure credit Nina Zumel, slides here)

And we worked through the usual bestiary of other metrics (precision, recall, sensitivity, specificity, AUC, balanced accuracy, and many more).

Please read on to see what stood out. Continue reading A bit on the F1 score floor

Reading and writing proofs

Posted on Categories Expository Writing, MathematicsTags , , ,

In my recent article on optimizing set diversity I mentioned the primary abstraction was of “diminishing returns” and is formalized by the theory of monotone submodular functions (though I did call out some of my own work which used a different abstraction). A proof that appears again and again in the literature is: showing that when maximizing a monotone submodular function the greedy algorithm run for k steps picks a set that is scores no worse than 1-1/e less than the unknown optimal pick (or picks up at least 63% of the possible value). This is significant, because naive optimization may only pick a set of value 1/k of the value of the optimal selection.

The proof that the greedy algorithm does well in maximizing monotone increasing submodular functions is clever and a very good opportunity to teach about reading and writing mathematical proofs. The point is: one needs an active reading style as: most of what is crucial to a proof isn’t written, and that which is written in a proof can’t all be pivotal (else proofs would be a lot more fragile than they actually are).

Uwe Kils “Iceberg”

In this article I am attempting to reproduce some fraction of the insight found in: Polya “How to Solve It” (1945) and Doron Zeilberger “The Method of Undetermined Generalization and Specialization Illustrated with Fred Galvin’s Amazing Proof of the Dinitz Conjecture” (1994).

So I repeat the proof here (with some annotations and commentary). Continue reading Reading and writing proofs

Finding the K in K-means by Parametric Bootstrap

Posted on Categories data science, Exciting Techniques, Expository Writing, Mathematics, StatisticsTags , , , , , ,

One of the trickier tasks in clustering is determining the appropriate number of clusters. Domain-specific knowledge is always best, when you have it, but there are a number of heuristics for getting at the likely number of clusters in your data. We cover a few of them in Chapter 8 (available as a free sample chapter) of our book Practical Data Science with R.

We also came upon another cool approach, in the mixtools package for mixture model analysis. As with clustering, if you want to fit a mixture model (say, a mixture of gaussians) to your data, it helps to know how many components are in your mixture. The boot.comp function estimates the number of components (let’s call it k) by incrementally testing the hypothesis that there are k+1 components against the null hypothesis that there are k components, via parametric bootstrap.

You can use a similar idea to estimate the number of clusters in a clustering problem, if you make a few assumptions about the shape of the clusters. This approach is only heuristic, and more ad-hoc in the clustering situation than it is in mixture modeling. Still, it’s another approach to add to your toolkit, and estimating the number of clusters via a variety of different heuristics isn’t a bad idea.

Continue reading Finding the K in K-means by Parametric Bootstrap

Sequential Analysis

Posted on Categories math programming, Mathematics, StatisticsTags , , ,

We here at Win-Vector LLC been working through an ad-hoc series about A/B testing combining elements of both operations research and statistical points of view.

Our most recent article was a dynamic programming solution to the A/B test problem. Explicitly solving such dynamic programs gets long and tedious, so you are well served by finding and introducing clever invariants to track (something better than just raw win-rates). That clever idea is called “sequential analysis” and was introduced by Abraham Wald (somebody we have written about before). If you have ever heard of a test plan such as “first process to get more than 30 wins ahead of the other is the one we choose” you have seen methods derived from Wald’s sequential analysis technique.

Wald’s famous airplane armor problem

In this “statistics as it should be” article we will discuss Wald’s sequential analysis. Continue reading Sequential Analysis

A dynamic programming solution to A/B test design

Posted on Categories Exciting Techniques, math programming, Mathematics, StatisticsTags , , , , , 2 Comments on A dynamic programming solution to A/B test design

Our last article on A/B testing described the scope of the realistic circumstances of A/B testing in practice and gave links to different standard solutions. In this article we will be take an idealized specific situation allowing us to show a particularly beautiful solution to one very special type of A/B test.

For this article we are assigning two different advertising message to our potential customers. The first message, called “A”, we have been using a long time, and we have a very good estimate at what rate it generates sales (we are going to assume all sales are for exactly $1, so all we are trying to estimate rates or probabilities). We have a new proposed advertising message, called “B”, and we wish to know does B convert traffic to sales at a higher rate than A?

We are assuming:

  • We know exact rate of A events.
  • We know exactly how long we are going to be in this business (how many potential customers we will ever attempt to message, or the total number of events we will ever process).
  • The goal is to maximize expected revenue over the lifetime of the project.

As we wrote in our previous article: in practice you usually do not know the answers to the above questions. There is always uncertainty in the value of the A-group, you never know how long you are going to run the business (in terms of events or in terms of time, and you would also want to time-discount any far future revenue), and often you value things other than revenue (valuing knowing if B is greater than A, or even maximizing risk adjusted returns instead of gross returns). This represents severe idealization of the A/B testing problem, one that will let us solve the problem exactly using fairly simple R code. The solution comes from the theory of binomial option pricing (which is in turn related to Pascal’s triangle).

Yang Hui (ca. 1238–1298) (Pascal’s) triangle, as depicted by the Chinese using rod numerals.

For this “statistics as it should be” (in partnership with Revolution Analytics) article let us work the problem (using R) pretending things are this simple. Continue reading A dynamic programming solution to A/B test design

What is a good Sharpe ratio?

Posted on Categories Finance, Mathematics, Opinion, TutorialsTags , , 6 Comments on What is a good Sharpe ratio?

We have previously written that we like the investment performance summary called the Sharpe ratio (though it does have some limits).

What the Sharpe ratio does is: give you a dimensionless score to compare similar investments that may vary both in riskiness and returns without needing to know the investor’s risk tolerance. It does this by separating the task of valuing an investment (which can be made independent of the investor’s risk tolerance) from the task of allocating/valuing a portfolio (which must depend on the investor’s preferences).

But what we have noticed is nobody is willing to honestly say what a good value for this number is. We will use the R analysis suite and Yahoo finance data to produce some example real Sharpe ratios here so you can get a qualitative sense of the metric. Continue reading What is a good Sharpe ratio?

Proof style in the Erdős-Ko-Rado theorem

Posted on Categories MathematicsTags , ,

I recently wrote a tiny bit about the style of the original published proof of the Erdős-Ko-Rado theorem. In this note I’ll write a bit about the theorem and a bit more about the style of some later proofs. In particular I want to write about two different readings of Katona’s proof. Continue reading Proof style in the Erdős-Ko-Rado theorem

Erdős writing like a programmer

Posted on Categories Computer Science, MathematicsTags , , 2 Comments on Erdős writing like a programmer

Here is a neat example of famous mathematician Pál Erdős (often rendered in English as Paul Erdős) writing like a programmer in 1961. He goes to some trouble to introduce notation that allows him to index everything from zero. Continue reading Erdős writing like a programmer

How sure are you that large margin implies low VC dimension?

Posted on Categories data science, Mathematics, OpinionTags , , , ,

How sure are you that large margin implies low VC dimension (and good generalization error)? It is true. But even if you have taken a good course on machine learning you many have seen the actual proof (with all of the caveats and conditions). I worked through the literature proofs over the holiday and it took a lot of notes to track what is really going on in the derivation of the support vector machine.

Figure: the standard SVM margin diagram, this time with some un-marked data added.
Continue reading How sure are you that large margin implies low VC dimension?