What Is Target variable?

The target variable is the outcome a supervised model is trained to predict, conventionally denoted by y. A regression model may target a numeric forward return; a classification model may target an up-or-down label or another discrete outcome. The target is observed during model development but is unavailable when the model makes a live forecast.

Choosing a target variable determines the prediction task, loss function, and appropriate evaluation metric. In systematic trading, it should also match the intended portfolio decision and prediction horizon. A target that is statistically predictable need not be economically useful after costs and risk constraints.

See also

• Feature

• Label

• Information coefficient (IC)

Research and literature

• scikit-learn glossary: target data.