CFA Practice Question

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CFA Practice Question

What is the best way to test for data-mining bias?

A. Evaluate results against out-of-sample data.
B. Examine the record of the researchers.
C. Examine the database used for bias.
Correct Answer: A

The downfall of most analyses that suffer from data-mining bias is their performance with out-of-sample data. Data from the sample itself should fit well, because that is the data used in creating the rule. A better test is one based on data not used in creating it. The best type of out-of-sample data is, of course, future data - and the rule's future performance.

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