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This is a long set-up, but the pure intellectual challenge will make it worthwhile I promise ;-)

I have marketing data where there is a treatment and a control (i.e a customer gets no treatment). The event of interest (getting a loan) is relatively rare (<1%). My objective is to model the incremental lift between the response rate of the treatment and the control (treated group book rate - control group book rate) and use the model to make decisions about who to promote to in the future.

The treated group is large (600,000 records) and the control is about 15% the size.

This is a marketing exercise and we want to target those who need to be targeted to take the action of interest and not waste funds on those who will "do it anyway".

I have hundreds of variables and have experimented with various forms of Uplift modeling AKA Net Lift Models. I have tried many of the state-of-the-art methods in the literature and common practice. None very stable on this data set unfortunately.

I know (theoretically and after some experimentation) that there are a few variables that might impact the incremental lift. So, I created a matrix with the combinations of the levels of these variables and the number of records in the treated group, the number in the control group and the number of events of interest in each. So, from each row in the matrix one can calculate the incremental lift. There are 84 rows in the matrix.

enter image description here

I was think of modeling this (difference in) proportion using a beta regression, but the counts in some rows are very spares (perhaps no records in the control and more frequently, there are no events of interest). This can be seen in the top couple rows of the sample data above.

I began thinking about searching for the optimal solution to which of the rows of the matrix to select. Rows that are selected have the number of treatedHH and treatedLoans summed, along with the control. I am looking to maximize profit which can be estimated from these numbers.

I pushed the data through a genetic algorithm to determine which rows to keep. I got a solution returned and the result was better than including everyone (which is the base case). But, when I ran that selection on the validation sample I partitioned, the result was not so.

My question: Is there a way to design cross validation into this fitness function so that the solution does not over fit - which I presume happened in my first attempt.

Here is the fitness function I used:

calcProfit<-function(selectVec=c())
{

    TreatLoans<-sum(selectVec*dat$TreatedLoans)
	ControLoans<-sum(selectVec*dat$ControlLoans)
    TreatHH<-sum(selectVec*dat$treatedHH)
	ControlHH<-sum(selectVec*dat$controlHH)


    Incre.RR<-(TreatLoans/TreatHH)-(ControLoans/ControlHH)
    Incre.Loans<- Incre.RR * TreatHH
    Incre.Rev <- Incre.Loans*1400
    Incre.Profit<- (-1)*(Incre.Rev - (0.48*TreatHH))

    Incre.Profit


}

and the call in R: rbga.results = rbga.bin(size=84, zeroToOneRatio=3,evalFunc=calcProfit,iters=5000)

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Cross-validation will not eliminate over-fitting either, only (hopefully) reduce it. If you minimise any statistic with a non-zero variance evaluated over a finite sample of data there is a risk of over-fitting. The more choices you make, the larger the chance of over-fitting. The harder you try to minimise the statistic, the larger the chance of over-fitting, which is one of the problems with using GAs - it is trying very hard to find the lowest minimum.

Regularisation is probably a better approach if predictive performance is what is important, as it involves fewer choices.

Essentially in statistics, optimisation is the root of all over-fitting, so the best way to avoid over-fitting is to minimise the amount of optimisation you do.

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  • $\begingroup$ Thanks @Dikran. I am afraid I cant really use regularization (at least how I think of it -- e.g. LASSO ) given the nature of the problem. I was wondering, could I add a cross validation into the fitness function, whereby I would basically do something like create 5 bootrap samples, evaluate the performance on all of them and average them (or take the minimum or something). I wasnt sure if that really got me anywhere though. $\endgroup$ – B_Miner Jul 17 '12 at 13:15
  • $\begingroup$ I think it may be better just to use a less aggressive optimisation technique, such as greedy search, or to monitor generalisation performance on a disjoint validation set to avoid over-optimising the criterion. Early stopping often performs a similar function to regularisation if it is safe to assume that you start with a simple model which becomes progressively more complex as the criterion is optimised. $\endgroup$ – Dikran Marsupial Jul 17 '12 at 13:32
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there is only one paradigm that can avoid models from overfiting -on future data- that is of course VC bound. Many researchers say that VC bound is a pecimistic case but i don't understand .if there is only one woman in the space, is it possible to make comment about the beauty of that the only one female...

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  • $\begingroup$ Welcome to the site, @ender. By "VC", do you mean CV, ie, cross-validate? Also, please use correct grammar & punctuation in your posts here, our aim is to create a permanent record of high-quality statistical information in the form of questions & answers. Since you are new here, you may want to read our about page, which contains information for new users. $\endgroup$ – gung - Reinstate Monica Nov 30 '13 at 14:32
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    $\begingroup$ @gung VC probably refers to VC dimension. $\endgroup$ – Marc Claesen Jun 19 '14 at 15:32
  • $\begingroup$ Hmmm, interesting. Thanks for the tip, @MarcClaesen. $\endgroup$ – gung - Reinstate Monica Jun 19 '14 at 15:52
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There is nothing stopping you from including a regularization penalty in the optimization loop to be minimised, in addition to least squares. I have done this with good results. I agree with Dikran that optimisation will still cause over fitting in a regression model (even a cross-validated one) unless such steps are taken.

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  • $\begingroup$ Any idea how to do this in the example I gave? $\endgroup$ – B_Miner Jun 20 '14 at 15:40

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