Tutorial: Prevent look-ahead bias in market-data research

Look-ahead bias happens when a strategy uses information that would not have been available at the moment of a historical decision. It can make a weak strategy look excellent.

Implementation rules

• Align each feature to its actual publication timestamp, not the period it describes.
• Use point-in-time constituent lists for indices and universes.
• Delay fundamentals and economic releases by their real release schedule.
• Apply corporate-action adjustments consistently.
• Shift indicators so a signal from a completed bar is traded only on the next permitted bar.
• Store raw data and transformed data separately.

A useful test is to print the timestamp of every input used for a sample trade. If any input arrived after the decision time, the result is contaminated.

Which data source has been hardest for you to make point-in-time correct?