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

Henry Zhang

Papers from arXiv.org

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.

Date: 2026-11
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