What Is Look-ahead bias?
In quantitative finance, Look-ahead bias occurs when a trading strategy or model uses information that would not have been available at the time the trade was executed. This can lead to an unrealistic assessment of a strategy’s performance, as the model appears to have access to future information.
To avoid look-ahead bias, it is essential to ensure that the data used in backtesting and strategy development is strictly limited to the information that would have been available at the time of the trade. This can be achieved by using time-stamped data and careful data management techniques.