Look-Ahead Bias

DEFINITION of 'Look-Ahead Bias'

Bias created by the use of information or data in a study or simulation that would not have been known or available during the period being analyzed. This will usually lead to inaccurate results in the study or simulation.

BREAKING DOWN 'Look-Ahead Bias'

If an investor is backtesting the performance of a trading strategy, it is vital that he or she only uses information that would have been available at the time of the trade. For example, if a trade is simulated based on information that was not available at the time of the trade - such as a quarterly earnings number that was released three months later - it will diminish the accuracy of the trade's true performance.

Trading Center