Yang Zhang

Lin William Cong, Ke Tang, Jingyuan Wang et al.

We predict asset returns and measure risk premia using a prominent technique from artificial intelligence -- deep sequence modeling. Because asset returns often exhibit sequential dependence that may not be effectively captured by conventional time series models, sequence modeling offers a promising path with its data-driven approach and superior performance. In this paper, we first overview the development of deep sequence models, introduce their applications in asset pricing, and discuss their advantages and limitations. We then perform a comparative analysis of these methods using data on U.S. equities. We demonstrate how sequence modeling benefits investors in general through incorporating complex historical path dependence, and that Long- and Short-term Memory (LSTM) based models tend to have the best out-of-sample performance.

Guoliang Dong, Jingyi Wang, Jun Sun et al.

Neural networks are becoming a popular tool for solving many real-world problems such as object recognition and machine translation, thanks to its exceptional performance as an end-to-end solution. However, neural networks are complex black-box models, which hinders humans from interpreting and consequently trusting them in making critical decisions. Towards interpreting neural networks, several approaches have been proposed to extract simple deterministic models from neural networks. The results are not encouraging (e.g., low accuracy and limited scalability), fundamentally due to the limited expressiveness of such simple models. In this work, we propose an approach to extract probabilistic automata for interpreting an important class of neural networks, i.e., recurrent neural networks. Our work distinguishes itself from existing approaches in two important ways. One is that probability is used to compensate for the loss of expressiveness. This is inspired by the observation that human reasoning is often `probabilistic'. The other is that we adaptively identify the right level of abstraction so that a simple model is extracted in a request-specific way. We conduct experiments on several real-world datasets using state-of-the-art architectures including GRU and LSTM. The result shows that our approach significantly improves existing approaches in terms of accuracy or scalability. Lastly, we demonstrate the usefulness of the extracted models through detecting adversarial texts.