Research preview

The recent outburst by a high‑profile football manager rejecting baseless accusations illustrates how quickly unfounded narratives can dominate public discourse. For quantitative traders, the same phenomenon occurs when models mistake random noise for genuine patterns, leading to disastrous trading decisions. Understanding why and how over‑fitting happens is essential for preserving capital and maintaining a disciplined edge. The Allure of a Perfect Fit A model that appears to explain every twist and turn in historical price data feels like a golden ticket. In practice, a regression with many predictors can achieve an almost flawless in‑sample R‑square, especially when the sample size is modest....