What is overfitting? Why is it bad? And how can I avoid it?

Two enter, one remains…(Source: Wikipedia)

How historical data creates predictive power

  1. historical data to train your algorithm,
  2. the algorithm, and
  3. the predicted values that the algorithm produces after training on the historical data.

What is overfitting?

Why is overfitting bad?

How can I avoid overfitting?

  • Training data
  • Validation data
  • Test data

More On Overfitting for Panel Data

How 4-fold cross-validation works.

In Conclusion

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