factor-evaluation

Factor Evaluation

Mining proposes factors; evaluation decides whether to believe them. This skill recomputes a library's metrics on a chosen split and exposes overfitting.

See references/metrics.md for precise metric definitions (IC vs. paper-IC, ICIR, redundancy correlation).

Workflow

1. Recompute metrics

factorminer evaluate output/run1/factor_library.json \
  --data path/to/market_data.csv \
  --period test

--period selects the split: train, test, or both. Always lead with test — in-sample IC is not evidence.

2. Read the table

The output table reports, per factor: IC Mean, Paper IC, Abs IC, Paper ICIR, Win%, and Turnover. The summary block gives library-level means and the IC range.

3. Check decay

factorminer evaluate output/run1/factor_library.json --data market_data.csv --period both

--period both adds a decay table (train Paper IC → test Paper IC → delta). A large negative delta is the signature of an overfit factor. Report decay honestly; do not quote the train number as the headline.

4. Rank the survivors

To shortlist the strongest signals only:

factorminer evaluate output/run1/factor_library.json --data market_data.csv --period test --top-k 10

The top-K-by-IC table is the signal shortlist — the natural handoff to a research-idea workflow that wants to know which quantitative signals are currently working. The MCP screen_factors tool returns this same shortlist directly.

Interpreting the numbers

• IC ≈ 0.03–0.05 out of sample is a respectable single factor on liquid universes.
• ICIR matters more than IC: a small but stable IC beats a large erratic one.
• High turnover quietly erases IC once costs are applied — carry it into factor-backtest.

Guardrails

• Never present train metrics as the result. The deliverable is the test number.
• If every factor decays to ~0 on test, the library failed — say so. Do not search for a split that flatters it.