Research preview

The recent diplomatic exchange between Iran’s foreign minister and the U.S. special envoy, together with statements about Iran’s missile capabilities, has reminded market participants that geopolitical shocks can appear suddenly and propagate through many asset classes. For quantitative traders who rely on big‑data regressions and neural‑network forecasts, such events pose a particular risk: the underlying data‑generating process may change faster than models can adapt. This article shows how to think about those risks, illustrates the statistical mechanisms that turn a single news flash into a systematic forecasting error, and offers concrete steps to guard a high‑dimensional trading pipeline. 1. High‑Dimensional Regressions and the Curse of Over‑Fitting When a model includes...