Markov Models in the Analysis of Frequent Patterns in Financial Data

Article type: Research Article

Authors: Pragarauskaitė, Julija | Dzemyda, Gintautas

Affiliations: Institute of Mathematics and Informatics, Vilnius University, Akademijos 4, LT-08663 Vilnius, e-mail: [email protected], [email protected]

Abstract: Frequent sequence mining is one of the main challenges in data mining and especially in large databases, which consist of millions of records. There is a number of different applications where frequent sequence mining is very important: medicine, finance, internet behavioural data, marketing data, etc. Exact frequent sequence mining methods make multiple passes over the database and if the database is large, then it is a time consuming and expensive task. Approximate methods for frequent sequence mining are faster than exact methods because instead of doing multiple passes over the original database, they analyze a much shorter sample of the original database formed in a specific way. This paper presents Markov Property Based Method (MPBM) – an approximate method for mining frequent sequences based on kth order Markov models, which makes only several passes over the original database. The method has been implemented and evaluated using real-world foreign exchange database and compared to exact and approximate frequent sequent mining algorithms.

Keywords: frequent sequence mining, approximate methods, Markov models, financial data

Journal: Informatica, vol. 24, no. 1, pp. 87-102, 2013