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When Alpha Disappears: A One-Switch Benchmark for Decision-Time Leakage in Financial Backtests

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  • Fan Zhang
  • Zhen Li
  • Sijia Peng
  • Yu Chen

Abstract

We introduce When Alpha Disappears, a paired evaluation benchmark for diagnosing decision-time leakage in financial machine-learning backtests. Rather than treating leakage as a binary property, the benchmark estimates protocol-induced inflation by toggling one evaluation convention at a time around a clean $t{+}1$-open reference, while holding the data panel, walk-forward split, model family, horizon, portfolio rule, and cost convention fixed. Across two daily-OHLCV equity panels, six model families, and yearly tests from 2016--2024, we find that inflation is highly selective: centered temporal features and same-day-open execution with post-open daily-bar information cause large and stable increases in both predictive and trading metrics, whereas global normalization, future-informed graph structure, and same-day-close execution are weak in most settings. The benchmark is diagnostic rather than a claim of tradable alpha, and is intended to make evaluation assumptions, failure modes, and protocol fragility directly measurable.

Suggested Citation

  • Fan Zhang & Zhen Li & Sijia Peng & Yu Chen, 2026. "When Alpha Disappears: A One-Switch Benchmark for Decision-Time Leakage in Financial Backtests," Papers 2605.23959, arXiv.org.
  • Handle: RePEc:arx:papers:2605.23959
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