1 Take The Same Pair Of Matrices X Y You Used In Exercise 2 A Derive The Performance 2664122

1. Take the same pair of matrices (X, y) you used in exercise 2.

(a) Derive the performance from a 10-fold purged CV of an RF on (X, y), with 1% embargo.

(b) Why is the performance lower?

(c) Why is this result more realistic?

2. In this chapter we have focused on one reason why k-fold CV fails in financial applications, namely the fact that some information from the testing set leaks into the training set. Can you think of a second reason for CV’s failure?

 

 

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