SVM versus a monkey. Make your bets. - Quantdare

Ladies and gentlemen, place your bets, today we are going to do our best to beat one of the most frightening opponents that you can face in finance: a monkey. As you probably already know, in this blog we are all quite obsessed with predicting trends and returns, you can find other nice attempts in'Markov Switching Regimes say… bear or bullish?' by mplanaslasa or'Predict returns using historical patterns' by fjrodriguez2. Today, we are trying to predict the sign of tomorrow's return for different currency pairs, and I can assure you that a monkey making random bets on the sign and getting it right 50% of the time is going to be a tough benchmark. We are going to use an off the shelf machine learning algorithm, the support vector classifier. Support Vector Machines are an incredibly powerful method to solve regression and classification tasks.