iteration 9 · 2026-07-23 · #8 resume · laptop-drives-bigblack
Deflate a feature's out-of-sample Sharpe by how many features were tried. Resumed from checkpoint with a permutation-based pass-mark (learned from shuffled data), which fixed both open gates — all five now pass.
readonly=2. Compute wall ~16 s. Runs on the grounded #6 SFI return object + #0 CPCV substrate.The checkpoint found the textbook Bailey-Lopez de Prado formula over-states the expected best-of-N Sharpe by ~2×, because all the features are scored against the same shuffled answer key in each trial — a correlation the formula ignores. The fix: learn the pass-mark from the shuffled data itself (the empirical distribution of the family's best Sharpe under shuffling). That captures every correlation automatically and can't be gamed by mis-counting trials. The learned pass-mark reproduces to 0.01% across two independent shuffled sets; the textbook formula over-states it by 2.38×.
| Gate | Result | |
|---|---|---|
| Null FPR | SR0* 0.379; FPR on an independent holdout = 0.04 ≤ 0.05 | PASS |
| FST (SR0 = simulated max) | operational SR0 0.240 = simulated max, reproducible 0.01%; analytic formula over-states 2.38× | PASS |
| Power (look-ahead) | 0.52 → 0.76 → 0.92 vs per-N SR0*(N); N_min 30,000 | PASS |
| Known-duplicate N_eff | two clones → N_eff 1.0 | PASS |
| Harden — N_eff recovery | ONC N_eff 7.0 ≈ participation ratio 6.04 (no collapse) | PASS |
Sanity: the real family's best feature (vwap, SFI Sharpe 3.41) deflates to DSR = 1.0 vs SR0* 0.379 — a strong real signal survives.
§7's Harden guards the primary gaming surface — collapsing the effective trial count understates the pass-mark so noise wins. Guarded twice: (1) ONC's trial count (7) recovers the correlation participation ratio (6), so it doesn't collapse; and (2) the permutation pass-mark doesn't use the trial count at all — the shuffled distribution already embeds every correlation, so the gaming surface is closed by construction. The analytic formula (which does rely on the count) is kept only as a diagnostic, where it over-states 2.38×.
GROUNDED — the selection-bias deflator is validated.
Next iteration → #9 PBO / CSCV (on the SFI trial matrix) — the magnitude/overfit companion to this deflator (DSR is rank-blind to magnitude; #9 pairs the magnitude gate).