Database and analytic tools to analyze Chinese economy for everyone

Recently,  the Chinese economy has gotten attention from investors, financial professionals and policy makers all over the world.  Therefore It is good timing to start analyzing the Chinese economy by ourselves,  rather than just watching TV news. Because we should evaluate the performance of the Chinese economy by ourselves. In my articles I would like to explain how to analyze that step by step. This article is for anyone who are interested in China, including beginners of data analysis. Do not worry as no fee is needed and it is easy to understand. Let us start now!

1. Database

The database should have many kinds of data about the Chinese economy and  be updated periodically.  It should be available without any fees because this database will be used for everyone, not professional researchers who have a budget for data.  Quandl is considered as the best database for this purpose. It has more than 20 million data sets and most of them are available for free. In my view, it is good that we can start analyzing the economy by using data which are available for free in Quandl. In this database,  National Bureau of Statistics of China is an awesome data source for our purpose. It says "Statistics of China related to finance, industry, trade, agriculture, real estate and transportation".  There are more than 55,000 data sets in it so it is enough to start analyzing Chinese economy.  

2.  Analytic tools

R language is the best tool for analytics for everyone including beginners of data analysis. There are several reasons.  1. It is available without any fees.  2. There are many packages to analyze data so that we do not need programming from scratch.  3. There are a lot of documents and tutorials in English. Let us go to the web of R project and download R.  Then we can start data analysis anyway.  R and Quandl keep good relationship as Data can be accessed directly from R. There is no need to open the website of Quandl every time data are obtained. That is wonderful!  If you are familiar with python, it is also good to analyze data. When we need more complex models such as deep learning, I will use "torch" for modeling these models, although it is not for beginners.  

3. Tutorials 

DataCamp has a good tutorial about how to use R with Quandl. You can learn R by using it. It is available for free. If you are beginners of R, you can take several tutorials for beginners in it. They are also for free. If you want to access all tutorials and videos, you should pay fees. For beginners, I do not think they need to pay fees in order to take courses for beginners.  When you try to be an expert of R, it is recommended to take your favorite courses in DataCamp.  Some of the courses require to pay fees.

OK,  we have data, tools and tutorials.  Let us start analyzing Chinese economy.  It must be fun!

Note: Toshifumi Kuga’s opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or solicitation to buy, sell or hold any security or to adopt any investment strategy.  The information in this article is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding any country, region market or investment.

Data from third-party sources may have been used in the preparation of this material and I, Author of the article has not independently verified, validated such data. I accept no liability whatsoever for any loss arising from the use of this information and relies upon the comments, opinions and analyses in the material is at the sole discretion of the user. 

I am wondering why Ray Dalio starts Artificial-Intelligence Team in the hedge fund

In Feb 2015,  Ray Dalio, founder and co-CIO of Bridgewater Associates, one of the biggest hedge funds all over the world, starts the artificial intelligence (AI) team. According to Bloomberg.

I wonder why he does so. He already maintains fantastic track records for the long term. In order to understand what is in his mind, I read the articles about Ray Dalio and watch the videos including famous "HOW THE ECONOMIC MACHINE WORKS".  He repeated many times "We should know how the economic machine works", "We always should learn what we do not know". These philosophies are always consistent in his statements. Then I found that these are similar to logic of artificial intelligence or machine learning.  When we use artificial intelligence or machine learning,  first we construct the mathematical models, which are sometimes called "hypothesis". In my view, Ray's "economic machine"can be represented as models in computers. Then these models can learn new things when new data are provided. In other words, models may adjust to environmental changes by themselves.  So I imagine that Ray likes these characteristics about artificial intelligence or machine learning.  This is my view on why he starts AI team in the hedge fund.  

Then I wonder what is good if AI or machine learning is used for investments. According to the article, the team reports to David Ferrucci. He used to be the researcher who led the development of  Watson before joining Bridgewater Associates. Watson is a famous "cognitive computing" machine. I read the article about Watson which applies to cancer treatments in US and imagine how it may be used to make investment decisions and advantages of usage of computers. It gives us some clues about what investment models will be developed in the hedge fund.

1. Computers can operate 24hours 365 days at full speed

Computers need no rest time. Whatever data should be analyzed, computers can do that all day.  Global macro investments like Bridgewater Associates need a lot of information all over the world to make the diversified asset allocation. The more data we have, the more advantages the computers have.

2. Computers can read natural language, such as English.

This technology is sometimes called "Natural language processing".  Watson became famous when it defeated the human champions on Jeopardy!,  American game show in 2011.  Therefore, we analyze not only numerical data, but also natural language at tremendous speed.  So economic research papers can be used for analysis. This is also an advantage for using computers. With advantage 1 above, it makes computers more powerful for investment. 

3. Computers can learn from data by themselves

This is the biggest advantage to use computers for investment.  Although computers might make bad decisions initially, they can be smarter and better by learning.  This is just like process where children learn languages. The more they learn, the smarter they become.  The economic environment is always changing so it is critically important to adjust the changes.

No one knows what Ray thinks in his mind. So there is no clear answer why he starts Artificial-Intelligence Team.  Therefore, you can have your own answer to that.  This is a good starting point to think how AI or machine learning will impact financial industry in the future.  We have some clues according to the comments from Bridgewater Associates.  What do you think?

Asian economic analysis will start at the first quarter in 2015. TOSHI STATS will use machine learning for economic analysis !