Markov chains or Markov models are statistical sequential models leveraging probability concepts to predict outcome. This model is named after a Russian mathematician Andrey Markov. The main guiding principle for Markov chains is that the probability of certain events to happen in the future depend on past events. They can be broken down into different categories-
- First order Markov model- probability of next event depends on the current event
- Second order Markov model- probability of the next event depends on the current and the previous event
- A Hidden Markov Model ( HMM) is where the previous states from which the current state is generated are hidden or unobserved or unknown.
and so on…
Markov models have been proven to be very effective in sequential modeling such as-
- Speech recognition
- Handwriting recognition
- Stock market forecasting
- Online sales attribution to channels
Here is a pictorial depiction of HMM-
This link has a very good visual explanation of the Markov Models and guiding principles.
R has an in built package called “ChannelAttribution” for solving online multi channel attribution. This package has also an excellent explanation of the Markov Model and working example.
Python also has a library to build Markov models in Python.
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