Data Cleaning Part 3: Look-Ahead Bias and Survivorship Bias in Backtesting

Look-ahead bias lets a backtest use information it could not have had, and survivorship bias tests only the stocks that lived.

By Dorian

For every backtest there are two default assumptions.

First, the backtest engine knew only what was knowable at the moment of execution.

Second, the engine only saw every liquid stock available to trade at that instant/ that particular timeframe.

In the Part 1 of this series listed both biases as consequences of dirty data, and Part 2 showed how …