Federated Learning on Stochastic Neural Networks

Federated learning is a machine learning paradigm that leverages edge computing on client devices to optimize models while maintaining user privacy by ensuring that local data remains on the device. However, since all data is collected by clients, federated learning is susceptible to latent noise in local datasets. Factors such as limited measurement capabilities or human errors may introduce inaccuracies in client data. To address this challenge, we propose the use of a stochastic neural network as the local model within the federated learning framework. Stochastic neural networks not only facilitate the estimation of the true underlying states of the data but also enable the quantification of latent noise. We refer to our federated learning approach, which incorporates stochastic neural networks as local models, as Federated stochastic neural networks. We will present numerical experiments demonstrating the performance and effectiveness of our method, particularly in handling non-independent and identically distributed data.

Improved Stock Price Movement Classification Using News Articles Based on Embeddings and Label Smoothing

Stock price movement prediction is a challenging and essential problem in finance. While it is well established in modern behavioral finance that the share prices of related stocks often move after the release of news via reactions and overreactions of investors, how to capture the relationships between price movements and news articles via quantitative models is an active area research; existing models have achieved success with variable degrees. In this paper, we propose to improve stock price movement classification using news articles by incorporating regularization and optimization techniques from deep learning. More specifically, we capture the dependencies between news articles and stocks through embeddings and bidirectional recurrent neural networks as in recent models. We further incorporate weight decay, batch normalization, dropout, and label smoothing to improve the generalization of the trained models. To handle high fluctuations of validation accuracy of batch normalization, we propose dual-phase training to realize the improvements reliably. Our experimental results on a commonly used dataset show significant improvements, achieving average accuracy of 80.7% on the test set, which is more than 10.0% absolute improvement over existing models. Our ablation studies show batch normalization and label smoothing are most effective, leading to 6.0% and 3.4% absolute improvement, respectively on average.