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Machine Learning for Algorithmic Trading

You're reading from   Machine Learning for Algorithmic Trading Predictive models to extract signals from market and alternative data for systematic trading strategies with Python

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Product type Paperback
Published in Jul 2020
Publisher Packt
ISBN-13 9781839217715
Length 820 pages
Edition 2nd Edition
Languages
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Author (1):
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Stefan Jansen Stefan Jansen
Author Profile Icon Stefan Jansen
Stefan Jansen
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Table of Contents (27) Chapters Close

Preface 1. Machine Learning for Trading – From Idea to Execution 2. Market and Fundamental Data – Sources and Techniques FREE CHAPTER 3. Alternative Data for Finance – Categories and Use Cases 4. Financial Feature Engineering – How to Research Alpha Factors 5. Portfolio Optimization and Performance Evaluation 6. The Machine Learning Process 7. Linear Models – From Risk Factors to Return Forecasts 8. The ML4T Workflow – From Model to Strategy Backtesting 9. Time-Series Models for Volatility Forecasts and Statistical Arbitrage 10. Bayesian ML – Dynamic Sharpe Ratios and Pairs Trading 11. Random Forests – A Long-Short Strategy for Japanese Stocks 12. Boosting Your Trading Strategy 13. Data-Driven Risk Factors and Asset Allocation with Unsupervised Learning 14. Text Data for Trading – Sentiment Analysis 15. Topic Modeling – Summarizing Financial News 16. Word Embeddings for Earnings Calls and SEC Filings 17. Deep Learning for Trading 18. CNNs for Financial Time Series and Satellite Images 19. RNNs for Multivariate Time Series and Sentiment Analysis 20. Autoencoders for Conditional Risk Factors and Asset Pricing 21. Generative Adversarial Networks for Synthetic Time-Series Data 22. Deep Reinforcement Learning – Building a Trading Agent 23. Conclusions and Next Steps 24. References
25. Index
Appendix: Alpha Factor Library

Efficient data storage with pandas

We'll be using many different datasets in this book, and it's worth comparing the main formats for efficiency and performance. In particular, we'll compare the following:

  • CSV: Comma-separated, standard flat text file format.
  • HDF5: Hierarchical data format, developed initially at the National Center for Supercomputing Applications. It is a fast and scalable storage format for numerical data, available in pandas using the PyTables library.
  • Parquet: Part of the Apache Hadoop ecosystem, a binary, columnar storage format that provides efficient data compression and encoding and has been developed by Cloudera and Twitter. It is available for pandas through the pyarrow library, led by Wes McKinney, the original author of pandas.

The storage_benchmark.ipynb notebook compares the performance of the preceding libraries using a test DataFrame that can be configured to contain numerical or text data, or both. For the HDF5 library, we test both the fixed and table formats. The table format allows for queries and can be appended to.

The following charts illustrate the read and write performance for 100,000 rows with either 1,000 columns of random floats and 1,000 columns of a random 10-character string, or just 2,000 float columns (on a log scale):

Figure 2.12: Storage benchmarks

The left panel shows that, for purely numerical data, the HDF5 format performs best by far, and the table format also shares with CSV the smallest memory footprint at 1.6 GB. The fixed format uses twice as much space, while the parquet format uses 2 GB.

For a mix of numerical and text data, Parquet is the best choice for read and write operations. HDF5 has an advantage with read in relation to CSV, but it is slower with write because it pickles text data.

The notebook illustrates how to configure, test, and collect the timing using the %%timeit cell magic and, at the same time, demonstrates the usage of the related pandas commands that are required to use these storage formats.

You have been reading a chapter from
Machine Learning for Algorithmic Trading - Second Edition
Published in: Jul 2020
Publisher: Packt
ISBN-13: 9781839217715
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