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ShmueliV2 Date: March 31, 2023 Time: 12:36 pm
ShmueliV2 Date: March 31, 2023 Time: 12:36 pm
Second Edition
GALIT SHMUELI
National Tsing Hua University
Taipei, Taiwan
PETER C. BRUCE
statistics.com
Arlington, USA
MIA L. STEPHENS
JMP Statistical Discovery LLC
Cary, USA
MURALIDHARA ANANDAMURTHY
SAS Institute Inc
Mumbai, India
NITIN R. PATEL
Cytel, Inc.
Cambridge, USA
ShmueliV2 Date: March 31, 2023 Time: 12:36 pm
Copyright 2023 by John Wiley & Sons, Inc. All rights reserved
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any
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Library of Congress Cataloging-in-Publication Data Applied for:
Hardback: 9781119903833
Cover Design: Wiley
Cover Image: © AdobeLibrary/Adobe Stock Photos
Set in 10/12pt TimesLTStd by Straive, Chennai, India
ShmueliV2 Date: March 31, 2023 Time: 12:36 pm
To our families
Boaz and Noa
Liz, Lisa, and Allison
Michael, Jade Ann, and Audrey L
Seetha and Ananda
Tehmi, Arjun, and in memory of Aneesh
ShmueliV2 Date: March 31, 2023 Time: 12:36 pm
ShmueliV2 Date: March 23, 2023 Time: 8:23 am
CONTENTS
Foreword xix
Preface xx
Acknowledgments xxiii
PART I PRELIMINARIES
1 Introduction 3
1.1 What Is Business Analytics? 3
1.2 What Is Machine Learning? 5
1.3 Machine Learning, AI, and Related Terms 5
Statistical Modeling vs. Machine Learning 6
1.4 Big Data 6
1.5 Data Science 7
1.6 Why Are There So Many Different Methods? 8
1.7 Terminology and Notation 8
1.8 Road Maps to This Book 10
Order of Topics 12
vii
ShmueliV2 Date: March 23, 2023 Time: 8:23 am
viii CONTENTS
Predictive Analytics 19
Data Reduction and Dimension Reduction 19
Data Exploration and Visualization 19
Supervised and Unsupervised Learning 19
2.3 The Steps in A Machine Learning Project 21
2.4 Preliminary Steps 22
Organization of Data 22
Sampling from a Database 22
Oversampling Rare Events in Classification Tasks 23
Preprocessing and Cleaning the Data 23
2.5 Predictive Power and Overfitting 29
Overfitting 29
Creation and Use of Data Partitions 31
2.6 Building a Predictive Model with JMP Pro 34
Predicting Home Values in a Boston Neighborhood 34
Modeling Process 36
2.7 Using JMP Pro for Machine Learning 42
2.8 Automating Machine Learning Solutions 43
Predicting Power Generator Failure 44
Uber’s Michelangelo 45
2.9 Ethical Practice in Machine Learning 47
Machine Learning Software: The State of the Market by Herb
Edelstein 47
Problems 52
3 Data Visualization 59
3.1 Introduction 59
3.2 Data Examples 61
Example 1: Boston Housing Data 61
Example 2: Ridership on Amtrak Trains 62
3.3 Basic Charts: Bar Charts, Line Graphs, and Scatter Plots 62
Distribution Plots: Boxplots and Histograms 64
Heatmaps 67
3.4 Multidimensional Visualization 70
Adding Variables: Color, Hue, Size, Shape, Multiple Panels,
Animation 70
Manipulations: Rescaling, Aggregation and Hierarchies, Zooming,
Filtering 73
Reference: Trend Line and Labels 77
Scaling Up: Large Datasets 79
Multivariate Plot: Parallel Coordinates Plot 80
Interactive Visualization 80
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ShmueliV2 Date: March 23, 2023 Time: 8:23 am
CONTENTS ix
4 Dimension Reduction 91
4.1 Introduction 91
4.2 Curse of Dimensionality 92
4.3 Practical Considerations 92
Example 1: House Prices in Boston 92
4.4 Data Summaries 93
Summary Statistics 94
Tabulating Data 96
4.5 Correlation Analysis 97
4.6 Reducing the Number of Categories in Categorical Variables 98
4.7 Converting a Categorical Variable to a Continuous Variable 100
4.8 Principal Component Analysis 100
Example 2: Breakfast Cereals 101
Principal Components 106
Standardizing the Data 107
Using Principal Components for Classification and Prediction 110
4.9 Dimension Reduction Using Regression Models 110
4.10 Dimension Reduction Using Classification and Regression Trees 111
Problems 112
x CONTENTS
CONTENTS xi
xii CONTENTS
CONTENTS xiii
xiv CONTENTS
CONTENTS xv
xvi CONTENTS
CONTENTS xvii
PART IX CASES
22 Cases 533
22.1 Charles Book Club 533
The Book Industry 533
Database Marketing at Charles 534
Machine Learning Techniques 535
Assignment 537
22.2 German Credit 541
Background 541
Data 541
Assignment 544
ShmueliV2 Date: March 23, 2023 Time: 8:23 am
xviii CONTENTS
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