Skip to content

Purging and embargo are different

Question

Explain the different purposes of purging overlapping labels and applying an embargo around a test block.

Short answer

Purging removes training samples whose relevant information or label intervals overlap the test sample intervals. An embargo adds a buffer, commonly after a test block when later observations can enter training, to address remaining leakage or dependence linked to the data construction. Choose boundaries from label horizons and feature provenance. A fixed embargo is not proof of independence, and chronological forward-only designs still need label-availability checks.

Original question and answer written by SelfMadeQuant.com.

See the hint and the full worked solution in the question bank (free account).

Open the worked solution

Lessons behind this question