A Way to Detecting and Avoiding Overfitting Is to

question 110

Multiple Choice

A way to detecting and avoiding overfitting is to

• A) use the validation sample to calibrate the model
• B) use repeated runs of the model and averaging the results
• C) use computer simulation
• D) use rigorous statistical tools

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Definitions:

Cash Flows

The sum of money flowing in and out of a company, particularly influencing its ability to cover short-term obligations.

Cost of Capital

The yield a business needs to generate from its project ventures to preserve its market valuation and draw in capital.

NPV

Net Present Value, a method used in capital budgeting to evaluate the profitability of an investment or project, by calculating the difference between the present value of cash inflows and outflows.

IRR

Internal Rate of Return, a metric used in capital budgeting to estimate the profitability of potential investments.