Portfolio concentration behind an ML gain
Question
An ML portfolio beats a linear baseline, but most gains occur in one industry. How would you distinguish broad forecasting improvement from concentrated exposure?
Short answer
Decompose performance by industry, date and risk factor; compare exposures, turnover and capacity. Re-evaluate both models under common risk constraints and inspect industry-neutral forecasts. Do not retroactively remove the winning industry and claim an untouched result. Test any revised portfolio construction prospectively or on a reserved period, and report whether the original advantage depended on a concentrated bet.
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