- Joined Aug 27, 2009
It finally dawned on me what I had done.
The results cycling around 50% was exactly what you'd expect if the stock price was a random walk. By letting my program hunt through hundreds of stocks to find ones it did well on, it did stumble across some stocks that it happened to predict well for the validation time frame. However, just a few weeks or months later, during a different slice of the random walk, it failed.
There was no subtle underlying pattern. The model had simply gotten lucky a few times by sheer chance, and I had cherry picked those instances. It was not repeatable.
Thus, it was driven home - machine learning is not magic. It can't predict a random sequence, and you have to be very careful of your own biases when training models. Careful validation is critical.