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Introduction To Business Analytics: Chapter 6: Neural Networks For Data Mining
Introduction To Business Analytics: Chapter 6: Neural Networks For Data Mining
Learning Objectives
Understand
the concept and different types of artificial neural networks (ANN) Learn the advantages and limitations of ANN Understand how backpropagation neural networks learn Understand the complete process of using neural networks Appreciate the wide variety of applications of neural networks
4.
5.
Why is beer flavor important to the profitability of Coors? What is the objective of the neural network used at Coors? Why were the results of the Coors neural network initially poor, and what was done to improve the results? What benefits might Coors derive if this project is successful? What modification would you provide to improve the results of beer flavor prediction?
target customers (CRM) bank loan approval hiring stock purchase trading electricity approving loan applications fraud prevention predicting bankruptcy time series forecasting
Neural Networks (ANN) are biologically inspired and attempt to build computer models that operate like a human brain
These networks can learn from the data and recognize patterns
Neurons Cells (processing elements) of a biological or artificial neural network Nucleus The central processing portion of a neuron Dendrite The part of a biological neuron that provides inputs to the cell
Axon An outgoing connection (i.e., terminal) from a biological neuron Synapse The connection (where the weights are) between processing elements in a neural network
The best-known learning algorithm in neural computing. Learning is done by comparing computed outputs to desired outputs of historical cases
Network
Inputs Outputs Connection weights Summation function (combination function) Transformation function (activation function)
Connection weights
The weight associated with each link in a neural network model strength of the data transferred between layers in the network They are assessed by neural networks learning algorithms
Learning in ANN
Learning algorithm The training procedure used by an artificial neural network Supervised learning A method of training artificial neural networks in which sample cases are shown to the network as input and the weights are adjusted to minimize the error in its outputs
Learning in ANN
Learning in ANN
Learning in ANN
Learning in ANN
Input nodes Output nodes Number of hidden layers Number of hidden nodes
For the bankruptcy problem (and all of our examples) we have one hidden layer
The Bankruptcy problem has ten nodes in the hidden layer sometimes one might experiment with the number of nodes
Network training
An iterative process that starts from a random set of weights and gradually enhances the fitness of the network model and the known data set The iteration continues until the error sum is converged to below a preset acceptable level
Testing
Black-box testing Comparing test results to actual results The test plan should include routine cases as well as potentially problematic situations If the testing reveals large deviations, the training set must be reexamined, and the training process may have to be repeated Might compare ANN results with other methods such as logistic regression
Implementation of an ANN
Implementation often requires interfaces with other computer-based information systems and user training Ongoing monitoring and feedback to the developers are recommended for system improvements and long-term success It is important to gain the confidence of users and management early in the deployment to ensure that the system is accepted and used properly
your bankrupt project, create a new diagram called bankrupt_neural Drag the bankrupt data node onto your diagram From the Model tab, drag the Neural Network node onto the diagram and connect Connect the data node to the Neural Network Node
Highlight the Neural Network node. In the property panel window, set model selection criterion to average error
In the Property Panel window, click on the square to the right of network and change the defaults for the Target Layer Combination, Activation, and Error functions as indicated. Note that we are using the default of 3 hidden units (nodes).
The results show an excellent fit with the cumulative lift equal to the best cumulative lift, no misclassifications, and an average error nearly zero.
In the Property Panel click on the box to the right of Exported Data to see the individual predictions and probabilities. The logistic activation function at the target level provides the probabilities, like those obtained from logistic regression
Similar to what we did with logistic regression add the bankruptscore data node and the score node to the diagram as shown.
After running the score node, the output shows that 6 firms are predicted to go bankrupt (vs. 4 under logistic regression)
For details about the individual predictions, highlight the Score node and on the left-hand panel click on the square to the right of Exported Data. Then in the box that appears click on the row whose Port entry is Score. Then click on Explore.