Peng Yaohao Big Data, machine learning and challenges of high dimensionality in financial administration Brasília - DF August/2019 Peng Yaohao Big Data, machine learning and challenges of high dimensionality in financial administration/ Peng Yaohao. – Brasília - DF, August/2019- 240 p. : il. (some colored) ; 30 cm. Advisor: Pedro Henrique Melo Albuquerque Thesis (Ph.D.) – University of Brasilia School of Economics, Business and Accounting (FACE) Graduate Program in Business Administration Finance and Quantitative Methods , August/2019. 1. Machine learning. 2. Complexity. 3. Nonlinearity. 4. Bias-Variance Dilemma. 5. Finance. I.Advisor: Pedro Henrique Melo Albuquerque II. Uni- versity of Brasilia. III. School of Economics, Business and Accounting (FACE). IV. Big Data, machine learning and challenges of high dimensionality in financial administration CDU 02:141:005.7 Peng Yaohao Big Data, machine learning and challenges of high dimensionality in financial administration Thesis submitted to the Graduate Program in Business Administration at University of Brasilia as partial fulfillment of the require- ments for attainment of Ph.D. degree in Business Administration, with major in Fi- nance and Quantitative Methods. The examining committee, as identified below, approves this thesis: Dr. Pedro Henrique Melo Albuquerque Advisor Dr. Herbert Kimura University of Brasilia Dr. André Luiz Fernandes Cançado University of Brasilia Dr. Flavio Luiz de Moraes Barboza Federal University of Uberlândia Brasília - DF August/2019 Canção da tese I Refração Auroras difusas pontuais Dispersão Num âmbar latente, mil cristais Criam teu saldão Sísifo: depois desse morro, outro jaz Vales e cristas, planícies jamais Se acomode e veja seu Império ao chão Inspiração Não parece ser, faz o parecer Erre nos erros dos errantes banais Promove na frente que eu arrumo atrás Interjeição Posso ignorar, consigo provar Reverência às referências germinais Exploro serras com grelhas de pombais Por diversão Legado do rei, o porquê já sei Haltere de chumbo e o peso que traz Ânfora de corvos, âncora no cais Pois sim, pois não Não venci ali, convenci aqui No próprio opróbrio, vanguarda tanto faz Em vácuos de plasma, outorga-se a paz II Sem desbrio Tricordiano vil Ao centro, bela vista Imponente rente ao frio Fé candil Mirando entre os dipolos, sem desvio Ser profundo, ou simplista À mercê do juízo ardil Ervilhei, sigilo enfim Melhor assim Conecto o mundo no meu posto de marfim Relíquias do Medievo, notas secas de um confuso bandolim Quem sentiu Turvos pulsos de um caudaloso rio Prudência, sapiência Mesclam num ósculo sombrio Concreto no quadril Ligo os pontos desse Cosmos baldio III Manga com jiló, açafrão e mel Compilando essa idiossincrasia de sabor Vem do Leste, faça o teste, sinestésico fervor Mar dentro do mar, céu além do céu Vagando eternos fractais buscando o atrator Ortodoxo, paradoxo, doce e gélido calor Cinco elementos de construção Vinte léguas de revelação Sete emoções de desilusão Duas dúzias de maturação Tubo de visões, hipocampo ao léu Venda seus segundos por sistemas em torpor Bota a pilha, pega a fila, bate as asas do condor Álcool em gel Reflexão em capacetes rotineiros Mão cruel Presunção traz ignomínia sem pudor Ode ao réu Sem contagem de dez números inteiros Fogaréu Foque só no seu histórico clamor Dono do hotel Imprimi suas glórias de vapor Não põe fogo no chapéu Resta retribuir o favor Caminhe sem temor Rumor, louvor Agora entendo o seu valor Acknowledgements Finishing a Ph.D. thesis is a huge challenge, I had the help of many many people throughout the journey, so I’ll try to dedicate some words of gratitude to everyone that contributed to this path. I’ll do my best as to not leave anyone out, but as there are so many names, I think it’s kind of inevitable to end up being unfair to some. Please don’t be mad at me if you fail to find your name in this section, be sure that your actions also helped to define me as I am today. First, I would like to thank my advisor, Prof. Pedro Henrique Melo Albuquerque, for all the assistance and encouragements that goes back to the classes at the undergrad- uate level. Thank you for being a mentor that taught me not only about mathematical models and scientific research, but also served as a model of a scholar, a teacher, and a friend. Thank you for believing in me from the start, all along you motivated me to always do my best, and still do. I thank the members of the examining committees at the theoretical essay evalu- ation and in the qualifying exam – Prof. Thiago Veiga Marzagão, Prof. Patrick Franco Alves, Prof. Flávio Luiz de Moraes Barboza, Prof. André Luiz Fernandes Cançado and Prof. Herbert Kimura – whose comments helped to improve the quality of this work in all stages. I would like to thank the following Professors from the Graduate Program in Management at the University of Brasilia (PPGA/UnB) for the teachings, advises and encouragements: Prof. Herbert Kimura, Prof. Ivan Ricardo Gartner, Prof. Vinícius Amorim Sobreiro, Prof. Otávio Ribeiro de Medeiros, Prof. Tomas de Aquino Guimarães, Prof. Edgar Reyes Junior, Prof. Francisco Antonio Coelho Junior, Prof. Gisela Demo Fiúza, Prof. Valmir Emil Hoffmann, Prof. Ricardo Corrêa Gomes, Prof. Carlos Denner dos Santos Júnior. I also thank Prof. Daniel Oliveira Cajueiro, whose classes of Finance Theory and Computational Methods I attended and yielded precious learning. I would like to thank my parents for the support and the understanding along all these years, although not always retributed in the same way. I thank my mother Rao E for having taught me about values, about right and wrong, about the importance of hardworking; I thank you for teaching me Chinese and for telling me that things were badly done when they were indeed badly done: all that’s good in me started from you. I thank my father Peng Bo for being a constant mirror for my actions, for showing me the limits of the human civilization, for teaching me about friendship and reciprocity, about “thinking big” and to always look at the whole board: you made me understand the importance of being responsible for all of my actions. I would like to thank my grandpa Rao Yupu (in memoriam), the man known as “encyclopedia”, my personification of wisdom and compassion, I really would like tohave known you better. I thank my grandma E Huanqin (in memoriam) for the beautiful moments (and the equally important not-so-beautiful moments) back in Beijing; I really miss you, there are many things that I never had the chance to ask you personally, it wouldn’t be easier to live with certain answers, but I do keep in me the better side. I thank my other grandma Bai Fengying (in memoriam) from whom I inherited my name; I hope to understand better your legacy and carry on some of the values you lived with. I would like to thank all other family members: my uncles Rao Gang, Rao Lei, Peng Futang (in memoriam), Peng Suqin, Zheng Ying, Liu Yihua, Ma Zhongqun; my cousins Rao Keyu (one of my first academic inspirations), Peng Yunbo, Peng Yunhe, Ma Wei, Sophie Rao and Irisa Rao. I’ve been fairly absent over the decades, but always present in a way as well; the reciprocal also applies. For my brothers beyond bloodlines (still alphabetically to avoid quarrels...): Afonso Salustiano Neri, Christian Maciel Machado Rocha, João Lucas Magalini Zago, Matheus Gonçalves de Sousa, and Sérgio Thadeu Tavares da Silva Júnior. All along you stood by my side, I’ll always be there for you knowing you’ll all be there for me should I need it; be sure that I’m the very same person you all once knew (and accordingly mocked on a regular basis...), and the core features that define me will never change. You’re part of everything that I have, and your friendships will always be one of my top achievements in this life. I would express my gratitude to all Professors I had during my academic trajectory at University of Brasilia: Prof. Danielly Silva Ramos Becard, Prof. Carlos Augusto Mello Machado, Prof. Haydée Glória Cruz Caruso, Prof. Virgílio Caixeta Arraes, Prof. Guilherme José da Silva e Sá, Prof. Maria Eduarda Tannuri-Pianto, Prof. Nilton Moura Barroso Neto, Prof. Claudio Ladeira de Oliveira, Prof. Érica Cirino Rosa, Prof. Luciano Martins Costa Póvoa, Prof. Cléria Botêlho da Costa (in memoriam), Prof. José Angelo Belloni, Prof. Daniel Oliveira Cajueiro, Prof. Paola Novaes Ramos, Prof. Pablo Holmes Chaves, Prof. Frederico Hartmann de Souza, Prof. Pio Penna Filho, Prof. Ráderson Rodrigues da Silva, Prof. Eduardo Monteiro de Castro Gomes, Prof. Roberto Goulart Menezes, Prof. Luiz Daniel Jatobá França, Prof. Guilherme Scotti Rodrigues, Prof. José Eustáquio Ribeiro Vieira Filho, Prof. André Luiz Marques Serrano, Prof. Pedro Henrique Melo Albuquerque, Prof. Tânia Maria Pechir Gomes Manzur, Prof. Maria Camila Baigorri, Prof. Natália Medina Araújo, Prof. George Rodrigo Bandeira Galindo, Prof. Ulysses Tavares Teixeira, Prof. Ana Flávia Barros-Platiau, Prof. Rafael Tavares Schleicher, Prof. Antônio Carlos Moraes Lessa, Prof. Marcelo de Oliveira Torres, Prof. Carlos Rosano Peña, Prof. Cristina Acciarri, Prof. Maria Helena de Castro Santos, Prof. Ivan Ricardo Gartner, Prof. Matías Alejandro Franchini, Prof. Ricardo Silva Azevedo Araújo, Prof. Victor Gomes e Silva, Prof. Eiiti Sato, Prof. Cristina Yumie Aoki Inoue, Prof. Carlos Roberto Pio da Costa Filho, Prof. Aline Gomes da Silva Pinto, Prof. Yuri Sampaio Maluf, Prof. Theo Allan Darn Zapata, Prof. Paulo Augusto Pettenuzzo de Britto, Prof. Carlos André de Melo Alves, Prof. Ana Carolina Pereira Zoghbi. Similarly,