Machine learning fits mathematical models to a set of input data to generate insights or make predictions. However, the algorithms are only as good as the data we use to train them. Poor training data will result in poor predictions “garbage in, garbage out.” In contrast, an input set with the right features can ease model training and lead to superior results. Therefore, developing successful machine learning models requires carefully exploring and engineering the input features.

Feature engineering is the art of exploring, creating, and selecting features. The process that leads to a good feature subset is often iterative and depends on the problem and the model being trained. Feature engineering can thus hardly be generalized. But don’t worry; this guide will provide an exemplary feature engineering process using Python and Scikit-learn. We will derive some general principles that will help you to deal with various feature engineering challenges. The example is a regression problem and will transform an initial dataset into a carefully selected set of powerful input features to train our model.

The remainder of this article proceeds as follows: We begin with a brief intro to feature engineering and describe valuable techniques. We then turn to the hands-on part, in which we develop a regression model for car sales. We apply various techniques that show how to handle outliers and missing values, perform correlation analysis, and discover and manipulate features. You will also find information about common challenges and helpful sklearn functions. Finally, we will compare our regression model to a baseline model that uses the original dataset.

## Feature Exploration, Feature Engineering, and Selection

Exploratory feature engineering refers to creating and analyzing a dataset in order to train a machine learning model. The goal is to identify features, tweak them, and select the most promising ones into a smaller feature subset. We can break this process down into several action items.

Data Scientists can easily spend 70% to 80% of their time on feature engineering. The time is well spent, as changes to input data have a direct impact on performance. This process is often iterative and requires repeatedly revisiting the various tasks as understanding the data, and the problem evolves. Knowing techniques and associated challenges helps in adequate feature engineering.

### Core Tasks

We can divide exploratory feature engineering into several sub-areas:

**Data discovery**: To solve real-world problems with analytics, it is crucial to understand the data. Once you have gathered your data, describing and visualizing the data are means to familiarize yourself with it and develop a general feel for the data.**Data structuring:**The data needs to be structured into a unified and usable format. Variables may have a wrong datatype, or the data is distributed across different data frames and must first be merged. In these cases, we first need to bring the data together and into the right shape.**Data cleansing:**Besides being structured, data needs to be cleaned. Records may be redundant or contaminated with errors and missing values that can hinder our model from learning effectively. The same goes for outliers that can distort statistics.**Data transformation:**We can increase the predictive power of our input features by transforming them. Activities may include applying mathematical functions, removing specific data, or grouping variables into bins. Or we create entirely new features out of several existing ones.**Feature selection:**Only some may contain valuable information from the many available variables. By sorting variables that are less relevant and selecting the most promising features, we can create models that are less complex and yield better results.

### Exploratory Feature Engineering Toolset

Exploratory analysis for identifying and assessing relevant features knows several tools:

- Data Cleansing
- Descriptive statistics
- Univariate Analysis
- Bi-variate Analysis
- Multivariate Analysis

## Data Cleansing

Educational data is often remarkably perfect without any errors or missing values. However, it is important to recognize that most real-world data has data quality issues. Some reasons for data quality issues are

- Standardization issues, because the data was recorded from different peoples, sensor types, etc.
- Sensor or system outages can lead to gaps in the data or create erroneous data points
- Human errors

An important part of feature engineering is to inspect the data and ensure its quality before use. This is what we understand as “data cleansing”. It includes several tasks that aim to improve the data quality, remove erroneous data points and bring the data into a more useful form.

- Cleaning errors, missing values, and other issues.
- Handling possible imbalanced data
- Removing obvious outliers
- Standardisation, e.g., dates or adresses

Accomplishing these tasks requires a good understanding of the data. We, therefore, carry out data cleansing activities closely intertwined with other exploratory tasks, e.g., univariate and bivariate data analysis. Also remember that visualizations can aid in the process, as they can greatly enhance your ability to analyze and understand the data.

#### Descriptive Statistics

One of the first steps in familiarizing oneself with a new dataset is to use descriptive statistics. Descriptive statistics help to better understand the data, and how the sample represents the real-world population. We can use several statistical measures to analyze and describe a dataset, including the following:

**Measures of Central Tendency**represent a typical value of the data.**The mean:**The average-based adds together all values in the sample and divides them by the number of samples.**The median**: The median is the value that lies in the middle of the range of all sample values**The mode:**is the most occurring value in a sample set (for categorical variables)

**Measures of Variability**tell us something about the spread of the data.**Range:**The difference between the minimum and maximum value**Variance:**This is the average of the squared difference of the mean.**Standard Deviation:**The square root of the variance.

- and
**Measures of Frequency**inform us how often we can expect a value to be present in the data, e.g., value counts

#### Univariate Analysis

As “uni” suggests, the univariate analysis focuses on a single variable. Rather than examining the relationships between the variables, univariate analysis employs descriptive statistics and visualizations to understand individual columns better.

Which illustrations and measures we use depends on the type of the variable.

**Categorical variables (incl. binary)**

- Descriptive measures include counts in percent and absolute values
- Visualizations include pie charts, bar charts (count plots)

**Continuous variables**

- Descriptive measures include min, max, median, mean, variance, standard deviation, and quantiles.
- Visualizations include box plots, line plots, and histograms.

#### Bi-variate Analysis

Bi-variate (two-variate) analysis is a kind of statistical analysis that focuses on the relationship between two variables, for example, between a feature column and the target variable. In the case of machine learning projects, bivariate analysis can help to identify features that are potentially predictive of the label or the regression target.

Model performance will benefit from strong linear dependencies. In addition, we are also interested in examining the relationships among the features used to train the model. Different types of relations exist that can be examined using various plots and statistical measures:

#### Numerical/Numerical

Both variables have numerical values. We can illustrate their relation using lineplots or dot plots. We can examine such relations with correlation analysis.

The ideal feature subset contains features that are not correlated with each other but are heavily correlated with the target variable. We can use dimensionality reduction to reduce a dataset with many features to a lower-dimensional space in which the remaining features are less correlated.

Traditional correlation analysis (e.g., Pearson) cannot consider non-linear relations. We can identify such a relation manually by visualizing the data, for example, using line plots. Once we denote a non-linear relation, we could try to apply mathematical transformations to one of the variables to make their relation more linear.

For pairwise analysis, we must understand which variables we deal with. We can differentiate between three categories:

- Numerical/Categorical
- Numerical/Numerical
- Categorical/Categorical

#### Numerical/Categorical

Plots that visualize the relationship between a categorical and a numerical variable include barplots and lineplots.

Especially helpful are histograms (count plots). They can highlight differences in the distribution of the numerical variable for different categories.

A specific subcase is a numerical/date relation. Such relations are typically visualized using line plots. In addition, we want to look out for linear or non-linear dependencies.

#### Categorical/Categorical

The relation between two categorical variables can be studied, including density plots, histograms, and bar plots.

For example, with car types (attributes: sedan and coupe) and colors (characteristics: red, blue, yellow), we can use a barplot to see if sedans are more often red than coupes. Differences in the distribution of characteristics can be a starting point for attempts to manipulate the features and improve model performance.

#### Multivariate Analysis

*The multivariate* analysis encompasses the simultaneous analysis of more than two variables. The approach can uncover multi-dimensional dependencies and is often used in advanced feature engineering. For example, you may find that two variables are weakly correlated with the target variable, but when combined, their relation intensifies. So you might try to create a new feature that uses the two variables as input. Plots that can visualize relations between several variables include dot plots and violin plots.

In addition, multivariate analysis refers to techniques to reduce the dimensionality of a dataset. For example, principal component analysis (PCA) or factor analysis can condense the information in a data set into a smaller number of synthetic features.

Now that we have a good understanding of what feature selection techniques are available, we can start the practical part and apply them.

## Feature Engineering for a Car Price Regression Model using Python and Scikit-learn

The value of a car on the market depends on various factors. The distance traveled with the vehicle and the year of manufacture are obvious dependencies. But beyond that, we can use many other factors to train a machine learning model that predicts the selling price of the used car market. The following hands-on Python tutorial will create such a model. We will work with a dataset containing used cars’ characteristics in the following. For marketing, it is crucial to understand what car characteristics determine the price of a vehicle. Our goal is to model the car price from the available independent variables. We aim to build a model that performs well on a small but powerful input subset.

Exploring and creating features varies between different application domains. For example, feature engineering in computer vision will differ greatly from feature engineering for regression or classification models, or NLP models. So the example provided in this article is just for regression models.

We follow an exploratory process that includes the following steps:

- Loading the data
- Cleaning the data
- Univariate analysis
- Bivariate analysis
- Selecting features
- Data preparation
- Model training
- Measuring performance

Finally, we compare the performance of our model which was trained on a minimal set of features to a model that uses the original data.

The Python code is available in the relataly GitHub repository.

### Prerequisites

Before you proceed, ensure that you have set up your Python environment (3.8 or higher) and the required packages. If you don’t have an environment, you can follow this tutorial to set up the Anaconda environment.

Also, make sure you install all required packages. In this tutorial, we will be working with the following standard packages:

*pandas**NumPy**matplotlib*- Seaborn
- Scikit-learn

You can install packages using console commands:

*pip install <package name>**conda install <package name>*(if you are using the anaconda packet manager)

### About the Dataset

Our dataset contains listings for 111763 used cars. The data includes 13 variables, including the dependent target variable

**prod_date:**The year of production**maker:**The manufacturer’s name**model:**The car edition**trim:**Different versions of the model**body_type:**The body style of a vehicle**transmission_type:**The way the power is brought to the wheels**state**: The state in which the car is auctioned**condition**: The condition of the cars**odometer**: The distance the car has traveled since manufactured**exterior_color**: Exterior color**interior_color**: Interior color**sale_price (target variable):**The price a car was sold**sale_date:**The date on which the car has been sold

The dataset is available for download from Kaggle.com, but you can just execute the code below and load the data from the relataly GitHub repository.

### Step #1 Load the Data

We begin by importing the necessary libraries and downloading the dataset from the relataly GitHub repository. Next, we will read the dataset into a pandas DataFrame. In addition, we store the name of our regression target variable to ‘price_usd,’ which is one of the columns in the initial dataset. The “.head ()” function displays the first records of our DataFrame.

# Tested with Python 3.8.8, Matplotlib 3.5, Scikit-learn 0.24.1, Seaborn 0.11.1, numpy 1.19.5 from codecs import ignore_errors import math import pandas as pd import numpy as np import matplotlib.pyplot as plt import seaborn as sns sns.set_style('white', {'axes.spines.right': False, 'axes.spines.top': False}) from pandas.api.types import is_string_dtype, is_numeric_dtype from sklearn.tree import DecisionTreeRegressor from sklearn.ensemble import RandomForestRegressor from sklearn.preprocessing import LabelEncoder from sklearn.metrics import mean_absolute_error, mean_absolute_percentage_error from sklearn.model_selection import cross_val_score, train_test_split from sklearn.inspection import permutation_importance from sklearn.model_selection import ShuffleSplit # Original Data Source: # https://www.kaggle.com/datasets/tunguz/used-car-auction-prices # Load train and test datasets df = pd.read_csv("https://raw.githubusercontent.com/flo7up/relataly_data/main/car_prices2/car_prices.csv") df.head(3)

We now have a dataframe that contains 12 columns and the dependent target variable we want to predict.

### Step #2 Data Cleansing

Now that we have loaded the data, we begin with the exploratory analysis. First, we will put it into shape.

#### 2.1 Check Names and Datatypes

If the names in a dataset are not self-explaining, it is easy to get confused with all the data. Therefore, will rename some of the columns and provide clearer names. There is no default naming convention, but striving for consistency, simplicity, and understandability is generally a good idea.

The following code line renames some of the columns.

# rename some columns for consistency df.rename(columns={'exterior_color': 'ext_color', 'interior': 'int_color', 'sellingprice': 'sale_price'}, inplace=True) df.head(1)

Next, we will check and remove possible duplicates.

# check and remove dublicates print(len(df)) df = df.drop_duplicates() print(len(df))

*OUT: 111763, 111763*

There were no duplicates in the data, which is good.

# check datatypes df.dtypes

We compare the datatypes to the first records we printed in the previous section. Be aware that categorical variables (e.g., of type “string”) are shown as “objects.” The data types look as expected.

Finally, we define our target variable’s name, “sale_price.” The target variable will be our regression target, and we will use its name often.

# consistently define the target variable target_name = 'sale_price'

#### 2.2 Checking Missing Values

Some machine learning algorithms are sensitive to missing values. Handling missing values is, therefore a crucial step in exploratory feature engineering.

Let’s first gain an overview of null values. With a larger DataFrame, it would be inefficient to review all the rows and columns individually for missing values. Instead, we use the sum function and visualize the results to get a quick overview of missing data in the DataFrame.

# check for missing values null_df = pd.DataFrame(df.isna().sum(), columns=['null_values']).sort_values(['null_values'], ascending=False) fig = plt.subplots(figsize=(16, 6)) ax = sns.barplot(data=null_df, x='null_values', y=null_df.index, color='royalblue') pct_values = [' {:g}'.format(elm) + ' ({:.1%})'.format(elm/len(df)) for elm in list(null_df['null_values'])] ax.bar_label(container=ax.containers[0], labels=pct_values, size=12) ax.set_title('Overview of missing values')

The bar chart shows that there are several variables with missing values. Variables with many missing values can negatively affect model performance, which is why we should try to treat them.

#### 2.3 Overview of Techniques for Handling Missing Values

There are various ways to handle missing data. The most common options to handle missing values are:

**Custom substitution value:**Sometimes the information that a value is missing can be important information to a predictive model. We can substitute missing values with a placeholder value such as “missing” or “unknown”. The approach works particularly well for variables with many missing values.**Statistical filling:**We can fill in a statistically chosen measure such as the mean or median for numeric variables, or the mode for categorical variables.**Replace using Probabilistic PCA:**PCA uses a linear approximation function that tries to reconstruct the missing values from the data.**Remove entire rows:**Sometimes it is crucial to ensure that we only use data we know is correct. In those cases, we can drop an entire row if it contains a missing value. This also solves the problem but comes at the cost of losing potentially important information – especially if the data quantity is small.**Remove the entire column:**It is another alternative way of resolving missing values. This is typically the least option, as we lose an entire feature.

Which cleaning method we use to handle missing values can dramatically affect our prediction results. To find the ideal method, it is often necessary to experiment with different techniques. Sometimes, the information that a value is missing can also be important. This occurs when the missing values are not randomly distributed in the data and show a pattern. In such a case, you should create an additional feature that states whether values are missing.

#### 2.4 Handle Missing Values

In this example, we will use the median value to fill in the missing values of our numeric variables and the mode to replace the missing values of categorical variables. When we check again, we can see that odometer and condition have no more missing values.

# fill missing values with the mean for numeric columns for col_name in df.columns: if (is_numeric_dtype(df[col_name])) and (df[col_name].isna().sum() > 0): df[col_name].fillna(df[col_name].median(), inplace=True) # alternatively you could also drop the columns with missing values using .drop(columns=['engine_capacity']) print(df.isna().sum())

Next, we handle the missing values of transmission_type by filling them with the mode.

# check the distribution of missing values for transmission type print(df['transmission_type'].value_counts()) # fill values with the mode df['transmission_type'].fillna(df['transmission_type'].mode()[0], inplace=True) print(df['transmission_type'].isna().sum())

We handle body_type analogs as transmission_type and fill the missing values with the mode. The mode is the value that appears most often in the data. The mode of transmission_type is “Sedan.” However, this value is not that prevalent, as half of the cars have other body types, e.g., “SUV.” Therefore, we will replace the missing values with “Unknown.”

# check the distribution of missing values for body type print(df['body_type'].value_counts()) # fill values with 'Unknown' df['body_type'].fillna("Unknown", inplace=True) print(df['body_type'].isna().sum())

Now we have handled most of the missing values in our data. However, some variables are still left, with a few missing values. We will make things easy and simply drop all remaining records with missing values. Considering that we have more than 100k records and only a few variables, we can afford to do this without fear of a severe impact on our model performance.

# remove all other records with missing values df.dropna(inplace=True) print(df.isna().sum())

Finally, we check again for missing values and see that everything has been filled. Now, we have a cleansed dataset with 13 columns.

#### 2.3 Save a Copy of the Cleaned Data

Before exploring the features, let’s make a copy of the cleaned data. We will later use this “full” dataset to compare the performance of our model with a baseline model.

# Create a copy of the dataset with all features for comparison reasons df_all = df.copy()

### Step #3 Getting started with Statistical Univariate Analysis

Now it’s time to analyze the data and explore potential useful features for our subset. Although the process follows a linear flow in this example, you may notice in practice that you must go back and forth between different steps of the feature exploration and engineering process.

First, we will look at the variance of the features in the initial dataset. Machine learning models can only learn from variables that have adequate variance. So, low-variance features are often candidates to exclude from the feature subset.

We use the .describe() method to display univariate descriptive statistics about the numerical columns in our dataset.

# show statistics for numeric variables print(df.columns) df.describe()

Next, we check the categorical variables. All variables seem to have a good variance. We can measure the variance with statistical measures or observe it manually using bar charts and scatterplots.

We can use histplots to visualize the distributions of the numeric variables. The example below shows the histplot for our target variable sale_price

# Explore the variance of the target variable variable_name = 'sale_price' fig, ax = plt.subplots(figsize=(14,5)) sns.histplot(data=df[[variable_name]].dropna(), ax=ax, color='royalblue', kde=True) ax.get_legend().remove() ax.set_title(variable_name + ' Distribution') ax.set_xlim(0, df[variable_name].quantile(0.99))

The histplot shows that sale prices are skewed to the left. This means there are many cheap cars and fewer expensive ones, which makes sense.

Next, we create bar plots for categorical values.

# 3.2 Illustrate the Variance of Numeric Variables f_list_numeric = [x for x in df.columns if (is_numeric_dtype(df[x]) and df[x].nunique() > 2)] f_list_numeric # box plot design PROPS = { 'boxprops':{'facecolor':'none', 'edgecolor':'royalblue'}, 'medianprops':{'color':'coral'}, 'whiskerprops':{'color':'royalblue'}, 'capprops':{'color':'royalblue'} } sns.set_style('ticks', {'axes.edgecolor': 'grey', 'xtick.color': '0', 'ytick.color': '0'}) # Adjust plotsize based on the number of features ncols = 1 nrows = math.ceil(len(f_list_numeric) / ncols) fig, axs = plt.subplots(nrows, ncols, figsize=(14, nrows*1)) for i, ax in enumerate(fig.axes): if i < len(f_list_numeric): column_name = f_list_numeric[i] sns.boxplot(data=df[column_name], orient="h", ax = ax, color='royalblue', flierprops={"marker": "o"}, **PROPS) ax.set(yticklabels=[column_name]) fig.tight_layout()

We can observe two things: First, the variance of transmission type is low, as most cars have an automatic transmission. So transmission_type is the first variable that we exclude from our feature subset.

# Drop features with low variety df = df.drop(columns=['transmission_type']) df.head(2)

Second, int_color and ext_color have many categorical values. By grouping some of these values that hardly ever occur, we can help the model to focus on the most relevant patterns. However, before we do that, we need to take a closer look at how the target variable differs between the categories.

### Step #4 Bi-variate Analysis

Now that we have a general understanding of our dataset’s individual variables, let’s look at pairwise dependencies. We are particularly interested in the relationship between features and the target variables. Our goal is to keep features whose dependence on the target variable shows some pattern – linear or non-linear. On the other hand, we want to exclude features whose relationship with the target variable looks arbitrary.

Visualizations have to take the datatypes of our variables into account. To illustrate the relation between categorical features and the target, we create boxplots and kdeplots. For numeric (continuous) features, we use scatterplots.

#### 4.1 Analyzing the Relation between Features and the Target Variable

We begin by taking a closer look at the int_color and ext_color. We use kdeplots to highlight the distribution of prices depending on different colors.

def make_kdeplot(column_name): fig, ax = plt.subplots(figsize=(20,8)) sns.kdeplot(data=df, hue=column_name, x=target_name, ax = ax, linewidth=2,) ax.tick_params(axis="x", rotation=90, labelsize=10, length=0) ax.set_title(column_name) ax.set_xlim(0, df[target_name].quantile(0.99)) plt.show() make_kdeplot('ext_color')

make_kdeplot('int_color')

In both cases, a few colors are prevalent and account for most observations. Moreover, distributions of the car price differ for these prevalent colors. These differences look promising as they may help our model to differentiate cheaper cars from more expensive ones. To simplify things, we group the colors that hardly occur into a color category called “other.”

# Binning features df['int_color'] = [x if x in(['black', 'gray', 'white', 'silver', 'blue', 'red']) else 'other' for x in df['int_color']] df['ext_color'] = [x if x in(['black', 'gray', 'white', 'silver', 'blue', 'red']) else 'other' for x in df['ext_color']]

Next, we create plots for all remaining features.

# Vizualising Distributions f_list = [x for x in df.columns if ((is_numeric_dtype(df[x])) and x != target_name) or (df[x].nunique() < 50)] f_list_len = len(f_list) print(f'numeric features: {f_list_len}') # Adjust plotsize based on the number of features ncols = 1 nrows = math.ceil(f_list_len / ncols) fig, axs = plt.subplots(nrows, ncols, figsize=(18, nrows*5)) for i, ax in enumerate(fig.axes): if i < f_list_len: column_name = f_list[i] print(column_name) # If a variable has more than 8 unique values draw a scatterplot, else draw a violinplot if df[column_name].nunique() > 100 and is_numeric_dtype(df[column_name]): # Draw a scatterplot for each variable and target_name sns.scatterplot(data=df, y=target_name, x=column_name, ax = ax) else: # Draw a vertical violinplot (or boxplot) grouped by a categorical variable: myorder = df.groupby(by=[column_name])[target_name].median().sort_values().index sns.boxplot(data=df, x=column_name, y=target_name, ax = ax, order=myorder) #sns.violinplot(data=df, x=column_name, y=target_name, ax = ax, order=myorder) ax.tick_params(axis="x", rotation=90, labelsize=10, length=0) ax.set_title(column_name) fig.tight_layout()

Again, for categorical variables, we want to see differences in the distribution of the categories. Based on the boxplot’s median and the quantiles, we can denote that prod_year, int_color, and condition show adequate variance. The scatterplot for the odometer value also looks good. So we want to keep these features. In contrast, the differences between “state” and “ext_color” are rather weak. Therefore, we exclude these variables from our subset.

# drop columns with low variance df.drop(columns=['state', 'ext_color'], inplace=True)

Finally, if you want to take a more detailed look at the numeric features, you can use jointplots. These are scatterplots with additional information about the distributions. The example below shows the jointplot for the odometer value vs price.

# detailed univariate and bivariate analysis of 'odometer' using a jointplot def make_jointplot(feature_name): p = sns.jointplot(data=df, y=feature_name, x=target_name, height=6, ratio=6, kind='reg', joint_kws={'line_kws':{'color':'coral'}}) p.fig.suptitle(feature_name + ' Distribution') p.ax_joint.collections[0].set_alpha(0.3) p.ax_joint.set_ylim(df[feature_name].min(), df[feature_name].max()) p.fig.tight_layout() p.fig.subplots_adjust(top=0.95) make_jointplot ('odometer') # Alternatively you can use hex_binning # def make_joint_hexplot(feature_name): # p = sns.jointplot(data=df, y=feature_name, x=target_name, height=10, ratio=1, kind="hex") # p.ax_joint.set_ylim(0, df[feature_name].quantile(0.999)) # p.ax_joint.set_xlim(0, df[target_name].quantile(0.999)) # p.fig.suptitle(feature_name + ' Distribution')

Here is another example of a jointplot for the variable ‘condition’.

# detailed univariate and bivariate analysis of 'condition' using a jointplot make_jointplot('condition')

The graphs show a linear relationship between the price for the condition and the odometer value.

#### 4.2 Correlation Matrix

Correlation analysis is a technique to quantify the dependency between numeric features and a target variable. Different ways exist to calculate the correlation coefficient. For example, we can use Pearson correlation (linear relation), Kendall correlation (ordinal association), or Spearman (monotonic dependence).

The example below uses Pearson correlation, which concentrates on the linear relationship between two variables. The Pearson correlation score lies between -1 and 1. General interpretations of the absolute value of the correlation coefficient are:

- .00-.19 “very weak”
- .20-.39 “weak”
- .40-.59 “moderate”
- .60-.79 “strong”
- .80-1.0 “very strong”

More information on the Pearson correlation can be found here and in this article on the correlation between covid-19 and the stock market.

We will calculate a correlation matrix that provides the correlation coefficient for all features in our subset, incl. sale_price.

# 4.1 Correlation Matrix # correlation heatmap allows us to identify highly correlated explanatory variables and reduce collinearity plt.figure(figsize = (9,8)) plt.yticks(rotation=0) correlation = df.corr() ax = sns.heatmap(correlation, cmap='GnBu',square=True, linewidths=.1, cbar_kws={"shrink": .82},annot=True, fmt='.1',annot_kws={"size":10}) sns.set(font_scale=0.8) for f in ax.texts: f.set_text(f.get_text())

All our remaining numeric features strongly correlate with price (positive or negative). However, this is not all that matters. Ideally, we want to have features that have a low correlation with each other. We can see that prod_year and condition are moderately correlated (coefficient: 0.5). Because prod_year is more correlated with price (coefficient: 0.6) than condition (coefficient: 0.5), we drop the condition variable.

df.drop(columns='condition', inplace=True)

### Step #5 Data Preprocessing

Now our subset contains the following variables:

- prod_year
- maker
- model
- trim
- body_type
- odometer
- int_color
- sale_price

Next, we prepare the data for use as input to train a regression model. Before we train the model, we need to make a few final preparations. For example, we use a label encoder to replace the strong_values of the categorical variables with numeric values.

# encode categorical variables def encode_categorical_variables(df): # create a list of categorical variables that we want to encode categorical_list = [x for x in df.columns if is_string_dtype(df[x])] le = LabelEncoder() # apply the encoding to the categorical variables # because the apply() function has no inplace argument, we use the following syntax to transform the df df[categorical_list] = df[categorical_list].apply(LabelEncoder().fit_transform) return df df_final_subset = encode_categorical_variables(df) df_all_ = encode_categorical_variables(df_all) # create a copy of the dataframe but without the target variable df_without_target = df.drop(columns=[target_name]) df_final_subset.head()

**Step #6 Splitting the Data and Training the Model**

To ensure that our regression model does not know the target variable, we separate car price (y) from features (x). Last, we split the data into separate datasets for training and testing. The result is four different data sets: x_train, y_train, x_test, and y_test.

Once the split function has prepared the datasets, we the regression model. Our model uses the Random Decision Forest algorithm from the scikit learn package. As a so-called ensemble model, the Random Forest is a robust Machine Learning algorithm. It considers predictions from a set of multiple independent estimators.

The Random Forest algorithm has a wide range of hyperparameters. While we could optimize our model further by testing various configurations (hyperparameter tuning), this is not the focus of this article. Therefore, we will use the default hyperparameters for our model as defined by scikit-learn. Please visit one of my recent articles on hyperparameter tuning, if you want to learn more about this topic.

For comparison reasons, we train two models—one model with our subset of selected features. The second model uses all features, cleansed but without any further manipulations.

We use shuffled cross-validation (cv=5) to evaluate our model’s performance on different data folds.

def splitting(df, name): # separate labels from training data X = df.drop(columns=[target_name]) y = df[target_name] #Prediction label # split the data into x_train and y_train data sets X_train, X_test, y_train, y_test = train_test_split(X, y, train_size=0.7, random_state=0) # print the shapes: the result is: (rows, training_sequence, features) (prediction value, ) print(name + '') print('train: ', X_train.shape, y_train.shape) print('test: ', X_test.shape, y_test.shape) return X, y, X_train, X_test, y_train, y_test # train the model def train_model(X, y, X_train, y_train): estimator = RandomForestRegressor() cv = ShuffleSplit(n_splits=5, test_size=0.3, random_state=0) scores = cross_val_score(estimator, X, y, cv=cv) estimator.fit(X_train, y_train) return scores, estimator # train the model with the subset of selected features X_sub, y_sub, X_train_sub, X_test_sub, y_train_sub, y_test_sub = splitting(df_final_subset, 'subset') scores_sub, estimator_sub = train_model(X_sub, y_sub, X_train_sub, y_train_sub) # train the model with all features X_all, y_all, X_train_all, X_test_all, y_train_all, y_test_all = splitting(df_all_, 'fullset') scores_all, estimator_all = train_model(X_all, y_all, X_train_all, y_train_all)

**Step #7 Comparing Regression Models**

Finally, we want to see how the model performs and how its performance compares against the model that uses all variables.

#### 7.1 Model Scoring

We use different regression metrics to measure the performance. Then we create a barplot that compares the performance scores across the different validation folds (due to cross-validation).

# 7.1 Model Scoring def create_metrics(scores, estimator, X_test, y_test, col_name): scores_df = pd.DataFrame({col_name:scores}) # predict on the test set y_pred = estimator.predict(X_test) y_df = pd.DataFrame(y_test) y_df['PredictedPrice']=y_pred # Mean Absolute Error (MAE) MAE = mean_absolute_error(y_test, y_pred) print('Mean Absolute Error (MAE): ' + str(np.round(MAE, 2))) # Mean Absolute Percentage Error (MAPE) MAPE = mean_absolute_percentage_error(y_test, y_pred) print('Mean Absolute Percentage Error (MAPE): ' + str(np.round(MAPE*100, 2)) + ' %') # calculate the feature importance scores r = permutation_importance(estimator, X_test, y_test, n_repeats=30, random_state=0) data_im = pd.DataFrame(r.importances_mean, columns=['feature_permuation_score']) data_im['feature_names'] = X_test.columns data_im = data_im.sort_values('feature_permuation_score', ascending=False) return scores_df, data_im scores_df_sub, data_im_sub = create_metrics(scores_sub, estimator_sub, X_test_sub, y_test_sub, 'subset') scores_df_all, data_im_all = create_metrics(scores_all, estimator_all, X_test_all, y_test_all, 'fullset') scores_df = pd.concat([scores_df_sub, scores_df_all], axis=1) # visualize how the two models have performed in each fold fig, ax = plt.subplots(figsize=(10, 6)) scores_df.plot(y=["subset", "fullset"], kind="bar", ax=ax) ax.set_title('Cross validation scores') ax.set(ylim=(0, 1)) ax.tick_params(axis="x", rotation=0, labelsize=10, length=0)

The subset model achieves an absolute percentage error of around 24%, which is not so bad. But more importantly, our model performs better than the model that uses all features. However, the subset model is less complex as it only uses eight features instead of 12. So it is easier to understand and less costly to train.

#### 7.2 Feature Permutation Importance Scores

Next, we calculate feature importance scores. In this way, we can determine which features attribute the most to the predictive power of our model. Feature importance scores are a useful tool in the feature engineering process, as they provide insights into how the features in our subset contribute to the overall performance of our predictive model. Features with low importance scores can be eliminated from the subset, or we can replace them with other features.

Again we will compare our subset model to the model that uses all available features from the initial dataset.

# compare the feature importance scores of the subset model to the fullset model fig, axs = plt.subplots(1, 2, figsize=(20, 8)) sns.barplot(data=data_im_sub, y='feature_names', x="feature_permuation_score", ax=axs[0]) axs[0].set_title("Feature importance scores of the subset model") sns.barplot(data=data_im_all, y='feature_names', x="feature_permuation_score", ax=axs[1]) axs[1].set_title("Feature importance scores of the fullset model")

In the subset model, most features are relevant to the model’s performance. Only date and int_color do not seem to have a significant impact. For the full set model, five out of 12 features hardly contribute to the model performance (date, int_color, ext_color, state, transmission_type).

Once you have a strong subset of features, you can automate the feature selection process using different techniques, e.g., forward or backward selection. Automated feature selection techniques will test different model variants with varying feature combinations to determine the best input dataset. This step is often done at the end of the feature engineering process. However, this is something for another article.

## Conclusions

That’s it for now! This tutorial has presented an exploratory approach to feature exploration, engineering, and selection. You have gained an overview of tools and graphs that are useful in identifying and preparing features. The second part was a Python hands-on tutorial. We followed an exploratory feature engineering process to build a regression model for car prices. We used various techniques to discover and sort features and make a vital feature subset. These techniques include data cleansing, descriptive statistics, and univariate and bivariate analysis (incl. correlation). We also used some techniques for feature manipulation, including binning. Finally, we compared our subset model to a model that uses all available data.

If you just take away one learning from this article, remember that in machine learning less is often more. So training classic machine learning models on carefully curated feature subsets likely outperforms models that use all available information.

I hope this article was helpful. I am always trying to improve and learn from my audience. So, if you have any questions or suggestions, please write them in the comments.

## Sources and Further Reading

- Zheng and Casari (2018) Feature Engineering for Machine Learning
- David Forsyth (2019) Applied Machine Learning Springer
- Chip Huyen (2022) Designing Machine Learning Systems: An Iterative Process for Production-Ready Applications

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Stock-market prediction is a typical regression problem. To learn more about feature engineering for stock-market prediction, check out this article on multivariate stock-market forecasting.