Quant Evidence Atlas Journal

Future information crossing backward through a quantitative research pipeline—an illustration of backtest data leakage. A backtest can look accurate while quietly using information that was not available at the time of each decision. That is data leakage. The safest test is not the one with the highest historical return; it is the one whose timestamps, universe, revisions and execution assumptions can be reconstructed without borrowing facts from the future. Quick answer Data leakage occurs whenever a historical strategy uses information that would not have been known or tradable at the simulated decision time. Common examples include today's index members, restated financial statements, revised economic data, closing prices used before the close, and transaction prices that were never available in the required size. Practical defense: for every input and every trade, record when the value became observable, when the order could first be sent, and which price could realistically ...