Search arXiv⌕ Search

arXiv · 2611.06607

Hard to Fool: A Bounded LLM Research Loop for Quantitative Finance, and What Two Dozen Campaigns Found

Abstract

Agentic research loops that let a language model propose a change, run a fixed experiment and keep whatever improves the metric work well in machine learning. In trading research the same loop is a machine for producing false discoveries: a backtest that "improves the metric" is, by default, overfit, look-ahead, a multiple-comparisons artifact, cost-free, or market drift wearing a strategy. We describe Autonomous Quant Researcher, an open-source loop built on the opposite premise: the model proposes, and only trusted code decides. Proposals are strict declarative JSON over a fixed vocabulary, so there is no model-written code to sandbox. Evaluation runs on immutable chronological stores split into discovery, validation and a final holdout that can be opened exactly once, after a durable receipt is written. Acceptance is a conjunction of absolute gates (positive edge and net P&L after costs, a positive weekly-cluster bootstrap lower bound, survival at elevated costs, per-year stability and sample floors), never a single score. Duplicates are refused before they spend a trial, and every formulation, refusal, crash and result is kept in a hash-chained, append-only ledger. We report every campaign run to date, across 0DTE options priced from traded option bars, overnight SPX verticals, daily ETF rules, technical-analysis premises, Kalshi crypto binaries, earnings options, off-exchange volume and a pre-registered alternative-data campaign. Most hypotheses fail, and we report them. Two results survive their pre-registered bars. The clearest example of the loop working is a failure: a language-model survivor that passed discovery and validation with Sharpe ratios near 3 and fell to 0.26 on its single holdout use. The value of such a loop lies less in what it finds than in how hard it is to make it report something that is not there.

Explore related subjects

Keep this discovery

Explore connections, maps & timelines

BibTeXRIS

Henry Zhang. 2026-11-04. Hard to Fool: A Bounded LLM Research Loop for Quantitative Finance, and What Two Dozen Campaigns Found. https://arxiv.org/abs/2611.06607

Cite the original work for its findings. Save a collection to share your selection of sources.

KEEP EXPLORING

Related papers

FinMultiHopQA: A KG-Grounded Multi-Hop Financial QA Benchmark for Evidence-Driven Reasoning

Multi-hop financial question answering often requires composing evidence distributed across filing sections, fiscal years, and peer companies. Prior financial QA benchmarks address parts of this problem individually, but none jointly support controlled multi-hop taxonomies, document topologies, motif-level reproducibility, and provenance-linked auditability at scale. We introduce FinMultiHopQA, a benchmark of 15,600 qualitative and quantitative questions, grounded in FinReflectKG, a temporally indexed financial knowledge graph derived from SEC 10-K filings with 17.5M+ triples. The pipeline instantiates statistically salient 2-3 hop typed KG motifs across intra-document, inter-year, and cross-company regimes. Beyond closing this gap, the same construction lets us hold each question's underlying evidence constant while varying only its presentation - embedding it in noisy surrounding context or changing its order - giving a controlled instrument to study a secondary question at scale: using six such presentations, we test whether reasoning LLMs' performance depends on evidence structure. Results confirm this: despite their reasoning capacity, judged correctness remains consistently lower under less-structured presentations of the same evidence - most sharply for quantitative cross-company reasoning and 3-hop branch motifs - indicating that reasoning alone does not fully offset how evidence is structured; KG-linked presentation also uses fewer input tokens by design. We release the benchmark, provenance annotations, model outputs, evaluation records, and supporting technical documentation.

q-fin.CP↗

Multidimensional Views Behind Target-Price Revisions: An LLM-Based Representation of Analyst Outlooks

A target price compresses an analyst's multidimensional views into a single number. We propose an LLM-based text representation that extracts these views from research reports as question-based outlook scores with supporting evidence. The questions organize reported views on earnings, valuation, industry conditions, and other investment dimensions into a compact representation of analyst sentiment. In walk-forward evaluation, the scores improve prediction of subsequent target-price revisions beyond current-revision momentum and sector differences. They outperform financial dictionary and FinBERT sentiment measures. These findings suggest that structured questions can capture information about subsequent analyst actions that is not fully reflected in the current numerical revision. By linking each dimension to an explicit investment question and supporting report evidence, the approach makes the extracted outlooks available for inspection and interpretation. It offers a way to complement target-price signals with a multidimensional view of the judgments expressed in analyst narratives.

q-fin.CP↗

CosmosAlpha: Multi-Relational Graph Search with Pareto-Guided Exploration for LLM-Driven Alpha Mining

Discovering predictive alpha factors from noisy financial data is a fundamental yet challenging problem in quantitative finance. LLM-driven formulaic alpha mining offers an attractive paradigm by combining interpretable symbolic expressions with iterative generation and refinement guided by quantitative feedback. However, existing generation-centric and tree-based search strategies primarily organize factors through generation lineage, leaving structural and statistical relationships across search branches underutilized. Consequently, information remains localized along parent--child trajectories, which can confine exploration to redundant regions. Moreover, effective factor discovery must account for multiple distinct objectives that cannot be adequately captured by a single search criterion. We introduce CosmosAlpha, a graph-based LLM factor-mining framework that represents discovered factors as a multi-relational graph encoding generation lineage, expression-structure similarity, and cross-sectional exposure correlation. A Graph Flow mechanism propagates search utilities across the graph, allowing each factor to be assessed using relational evidence from nearby factors rather than in isolation. Pareto-guided selection jointly considers quality, fertility and diversity, explicitly modeling their trade-offs within a multi-objective search framework. Across CSI 300 and CSI 500, CosmosAlpha-Graph achieves the best mean rank over seven predictive and portfolio metrics and outperforms its controlled CosmosAlpha-MCTS counterpart on every reported metric, showing a consistent advantage for relational graph search in LLM-driven factor mining. The source code is available at https://github.com/wzhmtldswz/CosmosAlpha

q-fin.CP↗