arXiv subjects

Matthew F. Dixon

Publications and source records attributed to Matthew F. Dixon.

4 recordsLinked to original sources

arXiv2026

Calibrating Semantic Uncertainty from Observable Language-Model Probabilities

As generative artificial intelligence enters scientific and professional work, its uncertainty must be defined on the states that matter for inference and decision-making. Language models assign probabilities to words, whereas applications require uncertainty over meaningful states such as diagnoses, hypotheses or operational conditions. We introduce a \emph{semantic map}: a prespecified, testable bridge from probabilities over verbal responses to a posterior over declared finite states. The language distribution remains unrestricted; held-out calibration connects it to a reference posterior. We derive posterior-error bounds and conditions for existence, conditional uniqueness, presentation stability and stable inverse recovery. This distinction matters because language probabilities depend on prompt wording, while the target posterior should not change under information-equivalent rewording. Experiments use professional market text compiled from Federal Reserve economic and financial series, together with controlled simulations having exact posteriors. Across two fitted language models, language-derived probabilities outperform printed numerical confidence, recover held-out posteriors with valid uncertainty coverage, remain largely stable under paraphrase and respond appropriately to altered evidence. \textbf{Prompt engineering optimises a wording-dependent response; robust scientific use requires validated stability of application-relevant meaning.} The proposed map turns semantic uncertainty in generative systems into an identifiable and testable statistical measurement problem and, when its acceptance conditions hold, yields an auditable posterior estimate.

stat.ME↗

arXiv2022

Deep Partial Least Squares for Empirical Asset Pricing

We use deep partial least squares (DPLS) to estimate an asset pricing model for individual stock returns that exploits conditioning information in a flexible and dynamic way while attributing excess returns to a small set of statistical risk factors. The novel contribution is to resolve the non-linear factor structure, thus advancing the current paradigm of deep learning in empirical asset pricing which uses linear stochastic discount factors under an assumption of Gaussian asset returns and factors. This non-linear factor structure is extracted by using projected least squares to jointly project firm characteristics and asset returns on to a subspace of latent factors and using deep learning to learn the non-linear map from the factor loadings to the asset returns. The result of capturing this non-linear risk factor structure is to characterize anomalies in asset returns by both linear risk factor exposure and interaction effects. Thus the well known ability of deep learning to capture outliers, shed lights on the role of convexity and higher order terms in the latent factor structure on the factor risk premia. On the empirical side, we implement our DPLS factor models and exhibit superior performance to LASSO and plain vanilla deep learning models. Furthermore, our network training times are significantly reduced due to the more parsimonious architecture of DPLS. Specifically, using 3290 assets in the Russell 1000 index over a period of December 1989 to January 2018, we assess our DPLS factor model and generate information ratios that are approximately 1.2x greater than deep learning. DPLS explains variation and pricing errors and identifies the most prominent latent factors and firm characteristics.

q-fin.PR↗

arXiv2020

Deep Fundamental Factor Models

Deep fundamental factor models are developed to automatically capture non-linearity and interaction effects in factor modeling. Uncertainty quantification provides interpretability with interval estimation, ranking of factor importances and estimation of interaction effects. With no hidden layers we recover a linear factor model and for one or more hidden layers, uncertainty bands for the sensitivity to each input naturally arise from the network weights. Using 3290 assets in the Russell 1000 index over a period of December 1989 to January 2018, we assess a 49 factor model and generate information ratios that are approximately 1.5x greater than the OLS factor model. Furthermore, we compare our deep fundamental factor model with a quadratic LASSO model and demonstrate the superior performance and robustness to outliers. The Python source code and the data used for this study are provided.

stat.ML↗

arXiv2018

Deep Learning for Spatio-Temporal Modeling: Dynamic Traffic Flows and High Frequency Trading

Deep learning applies hierarchical layers of hidden variables to construct nonlinear high dimensional predictors. Our goal is to develop and train deep learning architectures for spatio-temporal modeling. Training a deep architecture is achieved by stochastic gradient descent (SGD) and drop-out (DO) for parameter regularization with a goal of minimizing out-of-sample predictive mean squared error. To illustrate our methodology, we predict the sharp discontinuities in traffic flow data, and secondly, we develop a classification rule to predict short-term futures market prices as a function of the order book depth. Finally, we conclude with directions for future research.

stat.ML↗