Here is the quote from Dr. Ernest P. Chan http://www.epchan.com/biography/ about whether machine learning models has been proved successful or not in quantitative trading:
I do not find machine learning methods to be generally useful in quantitative trading. (I have explained this view in my first book Quantitative Trading.) The reason is that most machine learning methods tend to have too many parameters that need to be optimized with in-sample data. But financial time series data is actually quite limited (going high frequency doesn't help much due to the highly correlated nature of such data). So the amount of in-sample data isn't enough to overcome data snooping bias, and most machine learning models fail out-of-sample in financial time series predictions. Also, financial market suffers frequent regime changes, so few machine learning models with complicated rules can survive those changes without understanding the deeper, more fundamental patterns than only humans can detect and utilize (due to their contextual/external knowledge).
In the new book Advances in Financial Machine Learning by Marcos Lopez De Prado he proposes that quant researchers utilize a different type of price bar. His research has shown that by using alternatives to fixed time interval bars (minute, hour, day, week, etc.), the return series will exhibit better statistical properties. In other words using alternative bar types, the return series will better approximate normality/stationarity which will make our research and conclusions more robust.
Just a small list of links to discussion about risks and opportunities of robots in quantitative funds, and opportunities for developers in the field, especially for those who are still skeptical about the use of AI in the market.
Billionaire Robots: Machine Learning at Renaissance Technologieshttps://rctom.hbs.org/submission/billionaire-robots-machine-learning-at-renaissance-technologies/
“The Massive Hedge Fund Betting on AI”. Adam Satariano and Nishant Kumarhttps://www.bloomberg.com/news/features/2017-09-27/the-massive-hedge-fund-betting-on-ai
“Renaissance Technologies Co-Founder Reveals Secrets to Quant and VC Career Success”. Dan Butcherhttps://news.efinancialcareers.com/us-en/298218/renaissance-technologies-secrets-to-quant-hedge-funds-vc-career-success
The Revolutionary Way Of Using Artificial Intelligence In Hedge Fundshttps://www.forbes.com/sites/bernardmarr/2019/02/15/the-revolutionary-way-of-using-artificial-intelligence-in-hedge-funds-the-case-of-aidyia/#5da632eb57ca
Million Dollar Salaries for AI Researchers? Well, we Quants Have Seen this Movie Beforehttps://blog.goodaudience.com/million-dollar-salaries-for-ai-researchers-well-we-quants-have-seen-this-movie-before-8e7af51f6c63
How hedge funds are using AI and machine learninghttps://www.computerworlduk.com/galleries/data/how-hedge-funds-are-using-ai-machine-learning-3672971/
Forum on trading, automated trading systems and testing trading strategies
Machine learning, neural networks, deep learning : Do you find the available material on this site adequate ?
Alain Verleyen, 2018.05.13 20:29