Equity Style Timing Using Support Vector

Abstract. The disappointing performance of value and small cap strategies shows that style consistency may not provide the long-term benefits often assumed in the literature. In this study we examine whether the short-term variation in the U.S. size and value premium is predictable. We document style-timing strategies based on technical and (macro-)economic predictors using a recently developed artificial intelligence tool called Support Vector Regressions (SVR). SVR are known for their ability to tackle the standard problem of overfitting, especially in multivariate settings. Our findings indicate that both premiums are predictable under fair levels of transaction costs and various forecasting horizons

Minimally-sized balanced decomposition schemes for multi-class classification

Error-Correcting Output Coding (ECOC) is a well-known class of decomposition schemes for multi-class classification. It allows representing any multiclass classification problem as a set of binary classification problems. Due to code redundancy ECOC schemes can significantly improve generalization performance on multi-class classification problems. However, they can face a computational complexity problem when the number of classes is large. In this paper we address the computational-complexity problem of the decomposition schemes. We study a particular class of minimally-sized ECOC decomposition schemes, namely the class of minimally-sized balanced decomposition schemes (MBDSs) [14].We show thatMBDSs do not face a computational-complexity problem for large number of classes. However we also show that MBDSs cannot correct the classification errors of the binary classifiers in MBDS ensembles. Therefore we propose voting with MBDS ensembles (VMBDSs).We show that the generalization performance of the VMBDSs ensembles improves with the number of MBDS classifiers. However this number can become large and thus the VMBDSs ensembles can have a computational-complexity problem as well. Fortunately our experiments show that VMBDSs are comparable with ECOC ensembles and can outperform one-against-all ensembles using only a small number of MBDS ensembles