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Unformatted text preview: ied as likely to respond to a direct mail solicitation, vulnerable to switching over to a competing longdistance phone service, or a good candidate for a surgical procedure. Data mining creates classification models by examining already classified data (cases) and inductively finding a predictive pattern. These existing cases may come from an historical database, such as people who have already undergone a particular medical treatment or moved to a new longdistance service. They may come from an experiment in which a sample of the entire database is tested in the real world and the results used to create a classifier. For example, a sample of a mailing list would be sent an offer, and the results of the mailing used to develop a classification model to be applied to the entire database. Sometimes an expert classifies a sample of the database, and this classification is then used to create the model which will be applied to the entire database. Regression Regression uses existing values to forecast what other values will be. In the simplest case, regression uses standard statistical techniques such as linear regression. Unfortunately, many real-world problems are not simply linear projections of previous values. For instance, sales volumes, stock prices, and product failure rates are all very difficult to predict because they may depend on complex interactions of multiple predictor variables. Therefore, more complex techniques (e.g., logistic regression, decision trees, or neural nets) may be necessary to forecast future values. The same model types can often be used for both regression and classification. For example, the CART (Classification And Regression Trees) decision tree algorithm can be used to build both classification trees (to classify categorical response variables) and regression trees (to forecast continuous response variables). Neural nets too can create both classification and regression models. Time series Time series forecasting predicts unknownfuture values based on a time-varying series of predictors. Like regression, it uses known results to guide its predictions. Models must take into account the distinctive properties of time, especially the hierarchy of periods (including such varied definitions as the five- or seven-day work week, the thirteen-“month” year, etc.), seasonality, calendar effects such as holidays, date arithmetic, and special considerations such as how much of the past is relevant. 10 © 1999 Two Crows Corporation DATA MINING MODELS AND ALGORITHMS Now let’s examine some of the types of models and algorithms used to mine data. Most products use variations of algorithms that have been published in computer science or statistics journals, with their specific implementations customized to meet the individual vendor’s goal. For example, many vendors sell versions of the CART or CHAID decision trees with enhancements to work on parallel computers. Some vendors have proprietary algorithms which, while not extensions or enhancements of any published approach, may work quite well. Most of the models and algorithms discussed in this section can be thought of as generalizations of the standard workhorse of modeling, the linear regression model. Much effort has been expended in the statistics, computer science, artificial intelligence and engineering communities to overcome the limitations of this basic model. The common characteristic of many of the newer technologies we will consider is that the pattern-finding mechanism is data-driven rather than user-driven. That is, the relationships are found inductively by the software itself based on the existing data rather than requiring the modeler to specify the functional form and interactions. Perhaps the most important thing to remember is that no one model or algorithm can or should be used exclusively. For any given problem, the nature of the data itself will affect the choice of models and algorithms you choose. There is no “best” model or algorithm. Consequently, you will need a variety of tools and technologies in order to find the best possible model. Neural networks Neural networks are of particular interest because they offer a means of efficiently modeling large and complex problems in which there may be hundreds of predictor variables that have many interactions.(Actual biological neural networks are incomparably more complex.) Neural nets may be used in classification problems (where the output is a categorical variable) or for regressions (where the output variable is continuous). A neural network (Figure 4) starts with an input layer, where each node corresponds to a predictor variable. These input nodes are connected to a number of nodes in a hidden layer. Each input node is connected to every node in the hidden layer. The nodes in the hidden layer may be connected to nodes in another hidden layer, or to an output layer. The output layer consists of one or more response variables. 3 1 4 2 Inputs 6 Output 5 Hidden Layer Figure 4. A neural network with one hidden layer. © 1999 Two Crows Corpora...
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