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Look-ahead bias

A testing error in which information that became known later enters a calculation dated earlier: revised accounts, the closing price of the day, the new composition of an index.

How to read the number

It shows up as an implausibly smooth equity curve: a result with almost no setbacks usually means the future leaked into the past rather than that something was discovered.

When the metric lies

The commonest form is using the end of a reporting period instead of the publication date: the report enters the calculation months before the market saw it.

Also known as: future information leak

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