Also called overfitting
Curve fitting
Tuning a strategy until it memorises one stretch of history. It produces beautiful backtests and no future returns, which is why results are held out and re-tested.
A fuller explanation of this one is still being written. The definition above is the short answer.
See also
- Out of sample — Testing on data the search never saw. Angie hides the last quarter of history, then re-runs the winners on it, and flags any whose result collapses.
- Backtest — Running a set of rules over history to see what they would have done. It shows what did happen, never what will, and it flatters any rule tuned on the same data.
Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.
