Subject
Research & Validation
Hypotheses, baselines and backtests — and the ways validation quietly goes wrong.
Tutorials
- When It Happened vs. When You Knew: Why Data Has Two Clocks
Every fact carries two times: when it happened and when you could have known it. Mixing them up is a quiet reason many historical results look better than they should.
- The Look-Ahead Trap: Why Your Backtest Looks Too Good
A test that quietly uses information from after the decision date will look better than anything that could have been achieved. Four ways the future leaks in, a simulation of one of them, and how to close them.
- Try Enough Rules and One Will Work: Multiple Comparisons and Backtest Overfitting
Test twenty rules on the same history and the best one will look impressive even if all twenty are noise. How big the effect is, how to count your attempts, and how to correct for them.
- Honest Validation for Time-Ordered Data: Holdout, Cross-Validation and Embargo
Random splits quietly leak the future when data are ordered in time. How to split by time, step forward through history, and purge and embargo the overlap that still leaks.
Glossary terms
- Backfill
Loading or recomputing data for past periods after the fact — and recording when each value was really loaded, so history is not made to look earlier-known than it was.
- Backtesting
Evaluating a rule or model by replaying it on historical data as if it had been used at the time. Informative only if the replay is honest.
- Baseline
A simple method, such as repeating the last value, against which a new method is compared. A result means something only relative to it.
- Bitemporal Data
Data that records two times for every fact: when it was true in the world, and when the system learned it.
- Cohort Analysis
Grouping items or people by a shared starting point, such as the month they first appeared, and following each group over time.
- Concept Drift
A change over time in the relationship between inputs and the outcome, so that a model or rule that once worked slowly stops working.
- Content Analysis
A method that turns texts or images into countable categories using explicit coding rules, so that claims about content can be checked and repeated.
- Cross-validation
Estimating how well a method will do on new data by repeatedly leaving part of the data out, training on the rest, and rotating.
- Data Leakage
Information that would not exist at prediction time finds its way into the data used to build or evaluate a model, so results look better than they can ever be in use.
- Feature Engineering
Turning raw data into inputs a model or rule can use, such as ratios, rates of change and counts over windows. Each must be computable from what was known at the time.
- Hierarchy of Evidence
A ranking of kinds of evidence by how well their design guards against error: reviews and randomised experiments above observational studies, anecdotes at the bottom.
- Hindsight Bias
Once an outcome is known, believing it was predictable and that you knew it all along. It makes the past look more certain than it was.
- Holdout Set
Data set aside before any building begins and used once, at the end, to estimate performance on unseen data.
- Late-arriving Data
Records that reach a pipeline after the period they describe has already been processed or reported. They are normal, so a pipeline needs a rule for them.
- Look-ahead Bias
A study error where information that was not yet available at the time of a decision is used to evaluate that decision.
- Multiple Comparisons Problem
The more tests, rules or variants you try on the same data, the more likely some look significant by chance. The number of tries has to be counted.
- Overfitting
When a model learns the noise in its training data instead of the real pattern, and so fails on new data.
- P-value
How surprising the data would be if the null hypothesis were true. It is not the probability that the hypothesis is true.
- Point-in-Time (PIT)
Reading data as it was known at a past moment — not as it looks today after later corrections and additions.
- Pre-registration
Writing down, before seeing results, the question, the data and exactly how it will be analysed, and keeping that record unchanged.
- Purging and Embargo
Removing training observations whose time span overlaps the test period, and skipping a short stretch after it, so no information leaks between the two.
- Relevance Judgments
Human assessments of how well each result answers a query, recorded as grades. They are the answer key against which ranking methods are scored.
- Reproducibility
A result is reproducible when someone else, with the same data and code, gets the same result. It needs the data version, code, settings and environment to be recorded.
- Walk-forward Validation
Evaluating a forecasting method by training on data up to a date, testing on the period just after, then moving the date forward and repeating.