What is purged cross-validation?
hardAnswer
- López de Prado.
- Standard k-fold + (1) remove training samples whose labels depend on test period (purge).
- (2) Add embargo gap after test period (prevents leakage via serial correlation in labels/features).
- Essential when labels span multiple time bars (returns over next N days).
- Without purging, correlation between train and test through overlapping label windows inflates performance.
- Standard in quantitative finance.
Check yourself — multiple choice
- Same as k-fold
- López de Prado: k-fold + purge samples with label overlap into test period + embargo gap after test; prevents serial correlation leakage; finance standard
- Random
- Not real
Purged CV: purge overlapping labels + embargo; finance standard.
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