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Can machines beat humans in stock market trading? 

Machine Learning has been an area of great interest for traders because of the insane amount of money that could be made from the stock market. Arguably, Deep Reinforcement Learning can outperform human traders. However, most of the Deep Reinforcement Learning models built to date only consider the stock’s selling price minus the buying price to maximize profit. In a real-world scenario, transaction costs for buying, selling, and taxes affect the actual profit made by the investor. 

Shan Huang has discussed this approach in his research paper titled “Taxable Stock Trading with Deep Reinforcement Learning,” which forms the basis of the following text.

Importance of this research 

The researchers have demonstrated that tax ignorance could induce more than a 62% loss on the average portfolio returns. This research paper by Shan Huang aims to maximize net portfolio returns using Deep Reinforcement Learning while considering transaction and tax calculations. 

About the research 

The research paper mentions the mathematical details of the model built for Deep Reinforcement Learning. 

Assumptions

• The data set includes SPY’s (Exchange Traded Fund consisting of S&P’s top 500 companies) daily closed price and volumes from 13th November 2008 to 13th November 2018.
• Minimum time step dt = 1 representing one trading day, and hence the total trading days per year is 252.
• The tax regime is as mentioned below (in the US)
  • When a stock is held for more than one year, a 15% tax rate is applicable for capital gains.
  • When a stock is held for less than one year, a 25% tax rate is applicable for capital gains.
  • Investors can get a tax rebate to offset their capital gain for losses.
• The length of the trading period is set to be five years.
• A transaction cost of 0.1% is also included for more realistic calculations.

Research Data

The researchers have created a new OpenAI Gym environment where the observation in each timestep is SPY’s daily closed price, trading volume, averaged-basis, and average holding period. 

About the Model

In the words of the researchers

To represent the policy, we use the same default neural network architecture as PPO with fixed-length trajectory segments, which was a fully-connected MLP with two hidden layers of 64 and 64 tanh units respectively. The final output layer has a linear activation. policy and value function are estimated through separated network. The number of steps of interaction (state-action pairs) for the agent and the environment in each epoch is 5000 and the number of epochs is 50. The hyperparameter for clipping in the policy objective is chosen to be 0.2 and the GAE-Lambda is 0.97. The learning rate for policy and value function optimizer is 0.001 and 0.0003 respectively. If tax is not included in the model, the average expected return is 0.44 which seems quite promising. This considerable return is the result of exploiting price trending and frequently adjusting holding positions correspondingly, similar as the results of other AI platforms. However, this is not compelling since tax is heavily charged in a taxable year. Rather than ignoring taxes, the learning of stock trading should consider the effect of tax costs. We use PPO to train the stock trading policy in the environment with tax costs. The optimal stock trading policy in the model with taxes can achieve 0.13 average returns. To illustrate the suboptimality of the policy trained in the model without considering taxes, we apply this trained policy in the environment with tax costs, the average expected return drops to only 0.05.

Research Result: 

• The optimal stock trading policy with taxes can achieve 13% average returns in the model.
• Trained policy in the environment with tax costs, the average expected return drops to only 5%.
• This reduction is equal to 62%, which means that the returns shrunk by 62% upon consideration of taxes. 

Source: https://arxiv.org/pdf/1907.12093.pdf

Conclusion: 

Investment in public markets could be a good way to invest in the world’s top companies. Public markets could be a fantastic way to invest the money as the return are, on average higher than the rates offered by the banks and other investment options. Trading stocks by reinforcement learning can guide and help agents increase their portfolio returns. Deep Reinforcement Learning Models built for stock market investment sometimes neglect the tax rates, which can massively impact the overall returns. This research paper by Shan Huang is an attempt to integrate tax calculations in the net return calculations with Deep Reinforcement Learning. The objective is to maximize net returns (after subtracting taxes) for stock investments which are the actual returns for an investor.

Source: Shan Huang’s “Taxable Stock Trading with Deep Reinforcement Learning” https://arxiv.org/pdf/1907.12093.pdf 

Four hundred eighty thousand deaths are recorded every year in the US alone due to smoking. Also, as per research, life expectancy for smokers is atleast ten years shorter than for non-smokers. In recent years, the use of e-cigarettes has been increasing rapidly for adolescents. Sometimes, e-cigarettes act as a gateway to cigarette use, which could be severe. This makes it important to predict the probability of adolescents smoking cigarettes in the future. 

Seung Joon Nam, Han Min Kim, Thomas Kang, and Cheol Young Park have discussed this in their research paper titled “The Study of Machine Learning Models in Predicting the Intention of Adolescents to Smoke Cigarettes”, which forms the basis of the following text.

Importance of this research

Consuming nicotine can cause cancer (lung cancer), cardiovascular and metabolic diseases, respiratory diseases, and perinatal diseases. These conditions are fatal for individuals. If an ML algorithm can predict the probability of individuals smoking cigarettes, efforts can be made to educate these individuals about the ill effects of smoking. This counseling could help adolescents avoid the ill effects of cigarette smoking. Thus, prediction can directly help individuals stay away from the path of smoking cigarettes and help save lives!

Research Objective

The main aim of this research is to

• Find the best-fitting model to predict smoking intention for individuals
• Create a website to help adolescents prevent e-cigarette.

About the Research 

The researchers evaluated different models such as Decision Tree, Gaussian NB, Logistic Regression, Random Forest, and Gradient Boosting to predict the accuracy of ML models for accurately predicting the intention of Adolescents to smoke cigarettes. 

Research Result

Based on the experiments done by the researchers, they found the Gradient Boosting to be the most accurate way to predict smoking tendency in the future. The researchers have also published http://nyts.pythonanywhere.com for an anti-smoking campaign for teenagers. 

Conclusion

While healthcare has made a lot of progress in recent years, the number of medical conditions affecting teenagers has only increased. Often, these diseases are of our own making caused by our lifestyle choices. This research paper attempts to identify adolescents who are more likely to smoke and help adolescents make informed and healthier lifestyle choices. In the words of the researchers

E-cigarette use has increased among adolescents. This is a worldwide problem, because it has been stated in many researches mentioned in the introduction that e-cigarette use can cause future use of cigarettes. Since e-cigarette is a recent rising issue, there is little research done on this topic, compared to smoking cigarettes. Even among the researches done, there is a lack of researches implementing prediction models, which are more practical in preventing adolescents from using (e-)cigarettes. Thus, we researched using the 2018 NYTS data and developed multiple prediction models to predict a adolescent’s intention to smoke cigarette. The most accurate prediction model was Gradient Boosting Classifier with an overall accuracy of 93%. This model was applied in the website we designed to allow the public to input their information in respect to tobacco products, including e-cigarette, cigarette, and cigar. With this information, the algorithm can predict the respondee’s probability of future of smoking. This will help the public become more aware about certain factors in their lives and be attentive about their drug use or how their environment can affect their intention to smoke cigarettes. Further research could include a wider range of ages, since our research is mainly focused on adolescents rather than adults. In order to improve the accuracy of the prediction model, it is essential to increase the amount of data or choose better, more fitting, variables.

Source: Seung Joon Nam, Han Min Kim, Thomas Kang and Cheol Young Park’s “The Study of Machine Learning Models in Predicting the Intention of Adolescents to Smoke Cigarettes” https://arxiv.org/pdf/1910.12748v2.pdf 

Pre-employment exams are a systematic, objective method of collecting information about candidates throughout the recruiting process. All professionally created, well-validated pre-employment exams have one common factor: they offer a quick and accurate way to learn about a candidate’s talents and personality qualities. Pre-employment evaluations, based on the type of exam used, can provide useful information about a job applicant’s capacity to execute in the work environment.

What are Pre-employment assessment tests?

In recent times, pre-employment exams have grown in popularity to filter and manage large applicant streams. The Internet has made it simpler than ever for job searchers to apply for employment; according to one research, every corporate job posting receives an average of 250 applications. Some job searchers, dubbed “resume spammers,” send out mass email blasts with their applications, disregarding needed credentials or job fit. With candidates spending just 76 seconds to complete reading each job requirement, it’s no surprise that recruiters find that more than half of job applications do not satisfy the position’s fundamental requirements. Consequently, most hiring managers lack the time and resources to properly evaluate each student’s application, with recruiters allegedly devoting just 6.25 seconds on average reviewing each CV.

Types of Pre-Employment Tests

Pre-employment examinations come in a variety of shapes and sizes. We’ll go through five different sorts of assessments: aptitude, character, emotional maturity, risk, and skills exams.

 Aptitude Tests

Rational thought, problem-solving, and the capacity to acquire, assimilate, and apply new knowledge are assessed via aptitude tests. In essence, cognitive aptitude tests are used to evaluate a candidate’s general intellect or mental capacity. As per one research, 70% of companies sought individuals with problem-solving abilities, while 63% sought analytical abilities. These skills are tough to judge merely based on resumes and interviews, where aptitude tests come in handy. Aptitude exams may be utilized in virtually every employment setting, although they are most effective in mid and senior-level positions. Aptitude tests the most important skills for workplace success in a wide range of professions, so it’s no wonder that it’s the most consistent predictor of job satisfaction.

In contrast, research shows that mental aptitude tests are considerably more effective in predicting work success than other conventional hiring factors, with aptitude tests being twice as accurate as job interviews, three times as accurate as experience, and four times as accurate as educational level.

Personality Tests

Although personality tests are growing more popular among Hr managers, there are still some misunderstandings regarding what they are and how hiring managers could leverage them.

Personality tests are designed to answer the following questions: Will the candidate be happy in this position? Is the candidate displaying the behavioral qualities that have been related to job success? There are no right or incorrect answers on questionnaires, unlike aptitude exams. Rather, these assessments assess the degree to which persons have behavioral characteristics that are generally stable across time. By assessing if a candidate’s behavioral patterns are a perfect fit for both the role and the business culture, these qualities can help employers anticipate job fit.

Personality tests can assess various qualities, but the “Five Factors” or “Big Five Model” is the most often used personality test paradigm. Sociability, Conscientiousness, Assertiveness, Openness (to Knowledge), and Stress Tolerance are the five personality traits that regularly appear in empirical studies. The idea of personality “traits” is now broadly acknowledged. It has largely replaced Carl Jung’s earlier paradigm of character “types,” which was based on a theory of personality that classified people into each of two distinct types, such as loner or outsider, thinker or feeler, Form A or Type B. Growing evidence suggests that a tight dichotomy between two different kinds does not adequately represent the complexities of human personality; therefore the characteristics model is gaining traction in personality research.

Emotional Intelligence Tests

Emotionally intelligent tests are a relatively new evaluation area. Emotional maturity, or EI, is a relatively recent phenomenon that gained popularity in the 1990s. The idea of emotional maturity has become increasingly relevant in the workplace throughout time.

According to research, transformational leadership has been linked to crucial job outcomes like specific biochemical, collaboration, motivation, and decision-making. Deep emotional IQ has also been linked to organizational development. As a result, employers are becoming more interested in evaluating EI throughout the recruiting process.

Risk Tests

Risk assessments fundamentally assist businesses in reducing risk. The risk may take many forms, and different evaluations are used to assess various risks. A hazard assessment’s major value is that it aids businesses in reducing the danger of employees engaging in risky or unproductive work practices.

Skills Tests

Skills exams assess job-related abilities, such as verbal, numeracy, interpersonal skills, and more specific abilities such as typing and programming knowledge. These are abilities that applicants have gained via their schooling and work experiences; they do not necessarily represent fundamental ability but rather accumulated knowledge, whatever the applicant currently knows how to accomplish based on prior experience.

How to prepare?

Relax

Please remember that pre-employment testing results are simply one of many criteria that employers consider when determining whether or not you are qualified for the position. The impressive résumé you made is still important!

Set the stage

Many businesses need candidates to take the test before moving on to the interviewing process. Calculate how long it takes you to finish the exams if you are taking them remotely rather than at an employer’s office, and then restrict any distractions during that period.

Read the instructions

Skipping through directions is by far the most common error made by test takers. You may read and comprehend them in as much time as you like!

Get Familiar with the Tests

Personality, aptitude, and skills exams are the three major types of pre-employment exams. To feel more relaxed, familiarise yourself with the sort of test you’ll be taking.

Conclusion

In this climate, pre-employment exams may be quite beneficial to companies looking to hire the best people. Companies of all sizes may better manage the huge pool of candidates seeking available positions by incorporating pre-employment evaluations into the candidate selection procedure. While tech may be to blame for the rise in applications, it also offers a solution by making pre-employment testing easier to incorporate into the recruiting process.

10 Ways to Set Up Video Interview Process in Right Way

First and foremost, collaborate with your whole hiring team to create a written plan. Also, do a few practice interviews with the team to verify that everyone knows how to use the video and audio options, silence themselves, share their screen, and communicate throughout the interview. Go the extra mile and look into the problems other software users might have encountered to rehearse remedies for typical blunders. Request that applicants complete a survey questionnaire after each interview so that you may learn from them.

Let’s learn how to set up a video interview in the right way.

How to Set Up a Video Interview Properly?

1. Keep your body language in mind.

Just because you’re separated from the applicant by a screen doesn’t mean you can’t provide basic courtesy. Nonverbal communication accounts for 55 percent of the conversation, with the tone of voice accounting for another 38 percent; your words account for only 7%.

In fact, in a conference call, the way you put yourself is critical. Make direct eye contact, sit upright, and nod to demonstrate that you are paying attention to what the person is saying. 

2. Dress appropriately 

Dress professionally, even if you’re not at the workplace. If you show up to the interview in sweatpants and a t-shirt, the applicant will assume the talk isn’t significant unless it’s standard workplace clothing for your company. Wear a shirt and tie if that is the most acceptable attire; you may change after the interview.

Dressing professionally offers the prospect a sense of your company’s culture and makes a recorded interview feel more like an in-person interview. Of course, your clothes are generally only seen from the shoulders up, so a shirt, collared shirt, or beautiful sweater would suffice.

3. Emphasize your organization’s image

Candidates won’t experience your corporation culture model conceptualized during a conference call, so emphasize it throughout the conversation. Emphasize your company’s fundamental values and goals, tell tales about team excursions, and discuss how your workplace is organized and why.

You can give a detailed description of what it was like to work for your firm. Above all, bring your company’s culture into the interview by demonstrating your fundamental principles and treating the applicant as a coworker.

4. Examine previous interviews and take notes

Analyze your notes from prior interactions with the candidate before the video interview so that the next one is as effective as possible. During each interview, take some notes on what the applicant says, how engaged they appear, and their overall manner. It’s critical to let the interviewee know that you’re taking notes for future references but that you’re still paying much attention to the talk. They have no way of knowing what you’re composing, and it may appear to them that you’re not paying much attention.

Conference transcripts are generated by most systems, making it easy to capture the full dialogue and share it with other parties.

5. Be thoughtful and caring

Reduce background music and distractions to show your applicant the recognition they deserve. Yet, life occurs — especially at home — and interruptions are inevitable. Before you get started, take a minute to thank the applicant for their flexibility in changing the interview to a video call and requesting their tolerance if any issues arise. Also, don’t hold it against applicants if the same thing occurs to them.

6. Ask the same questions every time

Regardless of the interview style, you must ask all candidates the same set of questions. There’s no need to remake the wheel; keep asking the same questions during in-person and site meetings.

You’ll be more prepared to assess and compare applicants based on the value of their replies if interruptions occur, which are frequent during video interviews. Additionally, utilize an interview score to keep your evaluations impartial.

7. Take into account pre-recorded interviews.

When scheduling video interviews is challenging due to time restrictions or a lack of resources, probably ask participants to fill a pre-recorded interview. Go to them for a restricted number of questions to answer and keep in mind each answer’s length. Adhere to a few more in-depth questions while asking them.

Applicants will record their responses and upload the video clip of the interview. This may be done using email or a secure content-sharing site. Some sites even support this type of conference call. Make sure to provide the file size, type, and any time constraints. Prepare.

8. Have a backup plan 

Even if you check your recorded interview software several times, issues might arise. Have a failsafe in place if video or sound functions fail, internet connectivity becomes unreliable, or the environment becomes unsuitable for an interview. Whether you choose to do the interview over the phone or via FaceTime, make sure you have a backup plan.

You can consult with the candidate to see what works best for them. They may need to resort to a phone conversation if internet connectivity is a problem. Nevertheless, if nothing works, you may need to postpone the interview or resort to a pre-recorded interview.

9. Turn off your phone notifications

When doing video interviews, give applicants your entire focus and turn off the rest of the population. Warning noises can be picked up and amplified by your phone’s built-in speakers, resulting in a highly annoying interruption. Furthermore, it is impolite and inconsiderate of your interviewee’s time. Remember that this is a moment to analyze a candidate’s suitability for the position and pitch your firm as a possible employer, so approach them with the care you deserve.

10. Log on early

Don’t let your applicant wait around, unsure if they’ve arrived at the correct time or attended the correct meeting. Arrive five minutes early for your video interview and turn off your camera while you wait. This simple discipline will guarantee that you arrive on time for the meeting, but you may work or tidy your workspace while waiting. Your applicants will appreciate your readiness and timeliness.

Conclusion

The interview method via video may be a refreshing change of pace, and it can open doors for a wide range of applicants. There are benefits and drawbacks to all interview techniques, so it’s critical to have your video interviews set up and running correctly to get the most out of the procedure.

11 Things to Consider While Working in a Family Business

As per the Family Firm Institute, family firms account for 2/3rd of all businesses globally, making them critical for productivity expansion and employment creation.

While family companies are a key economic engine, only 30% survive to the 2nd gen, only 12% survive to the third generation, and just 3% survive to the fourth.

What is the key to running a successful family company? We’ve compiled a list of eight suggestions to help guarantee that your family business, or the one for which you work, survives the generations.

What is considered a family business?

Those engaged understand that the features of a family business differ from those of a larger corporation. Understanding who owns what and what actions should make such an individual vital for the firm and family to stay in peace. If the firm is still in the creator’s stage, it is simple for him to have authority over and select how the organizational assets will be distributed. However, if the second wave matures and expresses an interest in staying with the firm, all parties’ duties must be clearly defined.

11 Tips for a successful family business

• Communicate

Families have their communication style, which isn’t always the greatest, as many therapists will tell you. Break the mold and make open, frequent communication a priority in your family company. When you notice a communication problem, address it straight immediately.

• Evolve

When it concerns durability and the prosperity accompanying it, every business, especially intergenerational family companies, must change with the changes. A family-run company, the people who run it, irrespective of age, develop or avoid offending both customers and employees. Whether that’s abhorrence to new technology or opposition to changing social practices, a family-run business—and the people who run it—must evolve or end up alienating both customers and employees.

• Set boundaries

Setting limits is important to creating and maintaining success, as leaders of thriving family-owned companies know. Establish and maintain a clean line between family and business. To put it another way, keep family matters off the board and work in the workplace.

• Practice good governance

In the administration of family-owned enterprises, boundaries are also created. This type of monitoring, which top family companies use all over the globe, usually takes the form of a professional, advisory, or managerial board made up of non-family members with a small number of families.

• Recruit from the outside

It’s critical to recruit beyond your family for both personal and leadership roles, just as it’s critical to create governance with non-family individuals at the head. There are plenty of skills available. For talents and knowledge that family members lack, successful family businesses draw into this pool of talent.

• Treat employees like family.

Everyone is treated like family in a thriving family-owned firm, whether they are related or not. Customers are frequently subjected to this behavior. This “redefining family” strategy is used by recreational vehicle maker Jayco, which has been family-owned for more than 40 years. According to Jayco CEO Derald Bontrager, it pushes workers and leadership to “lift the bar as far as value is given,” according to Jayco CEO Derald Bontrager. Rather than depending on industry norms, “you should ask yourself, ‘Would you do something like this if that was one of my family members?’”

• Make it optional

A good family company does not use coercion or guilt to entice relatives to join the company. It allows employees to choose whether or not to work for the firm. Employees enthusiastic about the firm and their position within it are essential in every business, whether it is family-owned or not. Encouraging family members to come to work on their results in happier employees and a better bottom line.

• Plan for the future

Family companies that succeed don’t just let the cards fall wherever they may. They prepare for the future by developing family company succession plans well ahead of time. They also recognize potential in workers, both inside and beyond the family, and engage in them quickly to catch future leadership success.

• Mutual respect

A firm foundation of understanding and respect, like any strategic partnership, goes a long way. Acknowledge your parents’ past accomplishments and where they went before you joined them in business. Respect the wisdom and information they’ve gained through time. Parents, be proud of what your kids bring to the party, both in youthful enthusiasm and abilities, and unique qualities.

• Know yourself and each other

Personality traits and temperaments differ considerably. I propose that any children and parents who are starting a company together spend some time getting to know one another. The more you know about each other’s skills and shortcomings, as well as what makes them click, the more successfully and efficiently you can collaborate.

• Recognize the stages

When it comes to parents and children collaborating, there are several stages to go through. There will be an evident mentor/mentee relationship when the youngster initially joins the adult in business. After the parent has given their knowledge to the kid and the youngster has professionally grown into their own, this will eventually shift into an equal relationship. Finally, the parent may begin to slack down, leaving the kid to shoulder more of the burden and duty. Understand that these phases are normal, and learn to recognize which one you’re in and when you’re transitioning between them. Remember that all of these changes are made easier with a foundation of trust.

What are the advantages and disadvantages of a family business?

Advantages of a family-run business are:

• Stability
• Commitment
• Flexibility
• Long-term outlook
• Decreased cost

Disadvantages of a family run business are:

• A lack of family interest
• The conflict between family members
• A lack of structure
• Nepotism
• Succession planning

Conclusion

Every family business will have its own set of benefits and disadvantages. However, to remain effective, company leaders must use these advantages and conquer these obstacles to prevent being one of the 70% of firms that fail after the first generation.