Using NeuralTools to generate a pricing model for wool Kimbal Curtis and John Stanton.
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Transcript of Using NeuralTools to generate a pricing model for wool Kimbal Curtis and John Stanton.
![Page 1: Using NeuralTools to generate a pricing model for wool Kimbal Curtis and John Stanton.](https://reader033.fdocuments.net/reader033/viewer/2022051618/56649cf95503460f949caba4/html5/thumbnails/1.jpg)
Using NeuralToolsto generate
a pricing model for wool
Kimbal Curtis and John Stanton
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Australian Wool Industry
70% of world trade in apparel wool is Australian wool
Unlike other commodities• Each farm lot is fully measured
• Each farm lot has an individual price About 450,000 farm lots sold each
year in Australia Raw wool value of AUD3 billion
annually
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Wool prices & market reporting
Estimates of auction price on individual lots needed by sellers (farmers)
Forecast auction price on individual lots required by buyers for contracts
Market reporting of price paid for different wool types
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Neural nets & wool prices
Neural nets attractive because• Number of records is large
• Prices are dynamic• Price/attribute relationships are non-linear with
interactions
• Price/attribute relationships change over time
• The data set is incomplete and imprecise
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All Merino fleece lots
(Fremantle Jan-Mar 2006)
Each grey dot represents a parcel of wool sold at auction i.e. a ‘case’
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Long & short fleece lots
(Fremantle Jan-Mar 2006)
Long and short wool differentiated on price
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Merino pieces lots
(Fremantle Jan-Mar 2006)Pieces wool
(a subset of the wool clip)
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Changes to price diameterrelationship (September)
2001 2003
2005 2007
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The Challenge !
(Fremantle Jan-Mar 2006)
Market Indicators
Market indicators, like a stock market index, used to price wool
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Model development
Stages 1. Assemble 6 month data set2. Use Best Net Search3. Evaluate predictive capability4. Refine model
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Model development (1)
Assemble 6 month data setIndependent category and numeric variables
Dependent numeric variable (price)
Training, testing and prediction data
Use Best Net Search Evaluate predictive capability Refine model
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Model development (2)
Assemble a 6 month data set Use Best Net Search
GRNN – proved best in most cases(generalised regression neural net)
MLFN – also tried with up to 5 nodes(multi layer feed-forward neural net)
Evaluate predictive capability Refine model
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Configuration summary
Net Information Name Net Trained on Pieces wool sales, weeks 33 -
38, 2006 (3) Configurations Included in Search GRNN, MLFN 2 to 3 nodes Best Configuration GRNN Numeric Predictor Location Palisade Conf Curtis v6 BNS 6hrs.xls Independent Category Variables 8 (Sale centre, Sale week, Sale outcome,
Style, Med Hard Cotts, Unscourable Colour, Jowls, Dark Stain)
Independent Numeric Variables 8 (Staple Length, Staple Strength, Vegetable Matter, Diameter, CV Diameter, Mid Breaks, Yield, Hauteur)
Dependent Variable Numeric Var. (Clean price)
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Model development (3)
Assemble a 6 month data set Use Best Net Search Evaluate predictive capability Refine model
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Model evaluation (1)
NeuralTools outputsError measures
Actual versus Predicted, Residuals
Variable Impact Analysis
Live Prediction Relationships between variables Compare to published market
indicators
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Model evaluation (1)Training and Testing summary
Training
Number of Cases 5910 Training Time (h:min:sec) 0:39:43 Number of Trials 104 Reason Stopped Auto-Stopped % Bad Predictions (5% Tolerance) 14.7377% Root Mean Square Error 24.72 Mean Absolute Error 16.42 Std. Deviation of Abs. Error 18.48Testing
Number of Cases 1507 % Bad Predictions (5% Tolerance) 43.3975% Root Mean Square Error 53.18 Mean Absolute Error 36.99 Std. Deviation of Abs. Error 38.21
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Model evaluation - Training data(mean absolute error 16 cents)
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Model evaluation - Testing data(mean absolute error 37 cents)
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Model evaluation (1)Testing data (indicators)
Observed versus predicted for the published Pieces Market indicators
Most points are on the 1:1 line, but a small group hover above i.e. they have higher predicted values than reported
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Model evaluation (1)Variable impact analysis
Relative Variable Impacts
41.3%18.7%
11.7%8.8%
7.7%1.9%1.8%1.6%1.2%1.2%1.1%0.9%0.7%0.6%0.4%0.4%
0% 10% 20% 30% 40% 50% 60% 70%
Diameter Vegetable Matter
Staple Length Jowls
Hauteur Sale outcome
Med Hard Cotts Yield
CV Diameter Staple Strength
Sale centre Sale week Dark Stain
Style Unscourable Colour
Mid Breaks
This is a sensitivity analysis, not the percent of varianceaccounted for by each variable
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Model evaluation (2)
NeuralTools outputs• Error measures
• Actual versus Predicted, Residuals
• Variable Impact Analysis
Live Prediction Relationships between variables Compare to published market
indicators
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Model evaluation (2)Live prediction
Sale centre FremantleSale week W38
Style Average
Med Hard Cotts C0Unscourable Colour H0Jowls J0Dark Stain S0
Diameter 20.0
Yield 50.0Vegetable Matter 2.5
Staple Length 80Staple Strength 35Mid Breaks 55Hauteur 62
Clean price 664
Simple spreadsheet pricing tool.
Change any of the values in the yellow cells, and ‘Live prediction’ updates the clean price
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Model evaluation (3)
NeuralTools outputs• Error measures
• Actual versus Predicted, Residuals
• Variable Impact Analysis
Live Prediction Relationships between variables Compare to published market
indicators
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Model evaluation (3)relationships between variables
65
70
7580
85
25
30
35
40
45
590
600
610
620
630
640
650
660
670
680
CleanPrice
StapleLength
StapleStrength
SydneyWeek 3821 micron2% VM
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Model evaluation (3)relationships between variables
22
mic
ron
21
mic
ron
Fremantle Melbourne Sydney
65
7075
8085
25
30
35
40
45
595
600
605
610
615
620
625
630
635
Clean
Pr ice
Staple
Length
Staple
Str ength
65
7075
8085
25
30
35
40
45
500
520
540
560
580
600
620
Clean
Pr ice
Staple
Length
Staple
Str ength
65
7075
8085
25
30
35
40
45
600
610
620
630
640
650
660
670
680
Clean
Pr ice
Staple
Length
Staple
Str ength65
7075
8085
25
30
35
40
45
590
600
610
620
630
640
650
660
670
680
Clean
Pr ice
Staple
Length
Staple
Str ength
65
7075
8085
25
30
35
40
45
560
570
580
590
600
610
620
630
640
650
Clean
Pr ice
Staple
Length
Staple
Str ength65
7075
8085
25
30
35
40
45
540
550
560
570
580
590
600
610
620
630
640
Clean
Pr ice
Staple
Length
Staple
Str ength
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Model evaluation (3)relationships between variables
65
7075
8085
25
30
35
40
45
705
710
715
720
725
730
735
740
745
750
755
760
Clean
Pr ice
Staple
Length
Staple
Str ength65
7075
8085
25
30
35
40
45
750
760
770
780
790
800
810
820
830
840
Clean
Pr ice
Staple
Length
Staple
Str ength65
7075
8085
25
30
35
40
45
740
750
760
770
780
790
800
810
820
Clean
Pr ice
Staple
Length
Staple
Str ength
65
7075
8085
25
30
35
40
45
640
645
650
655
660
665
670
675
Clean
Pr ice
Staple
Length
Staple
Str ength65
7075
8085
25
30
35
40
45
670
680
690
700
710
720
730
740
Clean
Pr ice
Staple
Length
Staple
Str ength65
7075
8085
25
30
35
40
45
660
670
680
690
700
710
720
Clean
Pr ice
Staple
Length
Staple
Str ength
20
mic
ron
19
mic
ron
Fremantle Melbourne Sydney
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Price spread variation
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Model evaluation (4)
NeuralTools outputs• Error measures
• Actual versus Predicted, Residuals
• Variable Impact Analysis
Live Prediction Relationships between variables Compare to published market
indicators
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Model evaluation (4)predictive capability
MelbourneWeek 38
20 micron indicator
22 micron indicator
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Model evaluation (4)predictive capability
MelbourneWeek 38
Dark blue lots have SL, SS and VM “similar” to market indicator definition
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Model evaluation (4)predictive capability
MelbourneWeek 37
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Model evaluation (4)predictive capability
MelbourneWeek 37
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Model evaluation (4)predictive capability
MelbourneWeek 36
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Model evaluation (4)predictive capability
MelbourneWeek 35
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Model evaluation (4)predictive capability
MelbourneWeek 34
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Model evaluation (4)predictive capability
MelbourneWeek 33
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Model evaluation (4)predictive capability
FremantleWeek 37
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Model evaluation (4)predictive capability
FremantleWeek 38
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Model development (4)
Assemble a 6 month data set Use Best Net Search Evaluate predictive capability Refine model
• Reduce variables
• Combine selling centres
• Sale week - category variable
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Some Neural Net applications
Market reporting Price predictor Validation check for other estimates Missing sale problem Generate price matrices Estimate premiums and discounts
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Premium for “organic” wool
800
1000
1200
1400
800 1000 1200 1400
Actual price
Pre
dic
ted
pri
ce
800
1000
1200
1400
800 1000 1200 1400
Actual price
Pre
dict
ed p
rice
June-July saleApril sale
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Summary
Data rich application with characteristics that looked ideal for NeuralTools
Solutions generated which can support industry analysis and generation of indicators