Continuous Variable
Measuring Effectiveness of Predictive Models
Evaluating AI Models
Statistical Models for Financial Analysis
Key Statistical Techniques
Supervised Learning
Supervised
Key Factors in Predictions
Measuring Effectiveness of Predictive Models 
1 Classification Metrics Classification metrics are used when the outcome
variable is categorical
...2 Regression Metrics Regression metrics are applicable when the outcome variable is
continuous ...
Evaluating AI Models 
Continuous Improvement: Evaluation allows for the iterative improvement of models based on feedback and performance metrics
...R-squared Regression Statistical measure that represents the proportion of variance for a dependent
variable that's explained by an independent variable or variables
...
Statistical Models for Financial Analysis 
These models help financial analysts make informed decisions by quantifying relationships between various financial
variables and assessing risks associated with investments
...While challenges exist,
continuous advancements in statistical techniques and technology are enhancing the effectiveness of these models
...
Key Statistical Techniques 
Regression Analysis: A technique to understand the relationship between
variables
...Type Description Linear Regression Analyzes the relationship between two
continuous variables
...
Supervised Learning 
Supervised learning can be broadly categorized into two main types: Classification: In classification tasks, the output
variable is a category or label
...Regression: In regression tasks, the output variable is a
continuous value
...
Supervised 
Type Description Examples Classification A task where the output
variable is a category, such as 'spam' or 'not spam'
...filtering, image recognition, sentiment analysis Regression A task where the output variable is a
continuous value, such as price or temperature
...
Key Factors in Predictions 
Feature Selection Feature selection is the process of identifying the most relevant
variables to include in a predictive model
...Continuous Improvement Predictive analytics is not a one-time process but requires continuous monitoring and improvement
...
Key Metrics for Predictive Analytics Evaluation 
Regression Metrics Regression metrics are used to evaluate models predicting
continuous outcomes
...Squared Error (RMSE) The square root of the mean squared error, providing error magnitude in the same units as the target
variable ...
Key Concepts in Statistics 
Regression Analysis: A statistical method used to examine the relationship between one dependent
variable and one or more independent variables
...Normal Distribution: A
continuous probability distribution characterized by a bell-shaped curve, where most observations cluster around the central peak
...
Risk Analysis 
Continuous monitoring and review are essential to ensure that risk management strategies remain effective and relevant
...Sensitivity Analysis A technique used to determine how different values of an independent
variable impact a particular dependent variable
...
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