Chapter 7 · Section 5 practice

Event Labels and Two-stage Decisions

0 of 2 answered

These questions review the examples in the companion slides. Choose an answer, then check the explanation.

Question 1

The fixed-horizon label \(\mathbb 1[r_{t \to t+10} > 0]\) ignores…

  • The sign of the return
  • The horizon — 10 days is arbitrary
  • The path: a trade stopped out on day 3 can still end positive on day 10
  • Nothing — it is the label every paper uses

Question 2

Refitting each January on all earlier rows — what leaks?

  • Nothing — every feature uses data up to the close of \(t\)
  • The labels of the last 10 training days depend on returns inside the test year
  • The features of the test year are used in training
  • The side, because it uses a 200-day average