Modelling Techniques

How Neural Networks Work

A definition of a neural network is described as a neural network which is a massively parallel distributed processor that has a natural propensity for storing experiential knowledge and making it available for use (Haykin, 1998). However, for this project the neural network architecture consists of input and output layers plus one or two hidden layers. There are connections between neurons in each layer, which contain associated weights. These weights are repeatedly adjusted by the training algorithm to minimize error and give accurate predictions. The network learns by setting the conditions and also enables fine control for training stopping rules and network architecture or even automatically selecting the architecture. A neural network imitates the human brain in two respects: 1) Knowledge is acquired by the network through a learning process. 2) Interneuron connection strengths also known as synaptic weights are used to store the knowledge. Neural Network Structure

Strengths of Neural Networks Neural networks are preferred for predictive data mining applications because of the power, flexibility, and the ease of using the tool. Neural networks can be applied to applications such as forecasting consumer demand, predicting responses, determining risks, or even detecting fraudulent transactions. A neural network can estimate an extensive range of statistical models without requiring that you assume in advance certain relationships between the dependent and independent variables. The model in its place can determine the relationships during the learning process.

Multilayer Perception (MLP) The MLP technique is a supervised learning technique, which uses feed-forward architecture that allows data to move only in one direction. For instance the data flows from the input nodes via the hidden layer nodes and then to the output nodes. MLP is used for discovering more complex relationships.

Regression Analysis
Linear Regression Linear regression is a typical statistical method for classifying records based on the values of numeric input fields. Linear regression fits a straight line or surface that minimizes the inconsistencies between predicted and actual output values. How Linear Regression Works There must be only numeric fields used within a regression model. One target field must be defined (with the role set to Target) and one or more predictors (with the role set to Input). Any fields with a role set to Both or None are ignored, as well as any non-numeric fields. Strengths of Regression Modelling Regression models are less complicated and provide an effortlessly interpreted mathematical formula, which enables to generate predictions. Regression modelling is a well established and well understood statistical procedure. Another benefit of using this technique is that it is very fast technique to train. The regression node has the functionality for automatic field selection to enable the removal of non-significant input fields from the formula.