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Data Mining Bias
Definition
An investment analysis bias that results from repeatedly searching a data-set until a statistically significant pattern is found.
Using the term Data Mining Bias :
Due to the fact that Albert the Analyst could not prove his initial hypothesis about the trend in the government reported data, he then mined the data set and developed a new, but un-true hypothesis.
Pay Special Attention To :
Analysts that data mine work backwards to forwards, hoping that the data will reveal a pattern and then the analyst will try to develop a theory about why that pattern exists and what it means in terms of investment decision making. This is opposed to the right way to approach analysis, which is the development of a hypothesis and then the careful, step-wise test of this hypothesis.
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Related terms
Quantitative Analysis , Investment Analysis
