MMODELYST
Papers/Algometrics: Forecasting Under Algorithmic Feedback
PAP

Algometrics: Forecasting Under Algorithmic Feedback

May 13, 2026

arXiv
Abstract

In algorithmic markets, predictive models become part of the data-generating process they aim to forecast. Once their outputs are converted into trades, allocations, execution schedules, or risk controls, they change the future data on which they are evaluated. I introduce algometrics, a framework for time series whose evolution depends on the predictive algorithms forecasting them. The framework distinguishes historical risk, measured under passive forecasting, from deployment risk, measured when forecasts drive actions. I prove three results. First, deployment risk is not identifiable from passive historical data alone: even in a one-step linear feedback model, infinitely many algorithm-mediated environments induce the same historical law while implying different deployment risks for the same forecaster. Second, historical model rankings can invert under crowding, so a predictor with lower passive error can have higher deployment error once similar algorithms are adopted. Third, randomized or instrumented actions identify short-horizon linear feedback, and I derive a finite-sample bound for deployment-risk estimation. These results suggest that time-series benchmarks in algorithmic markets should report feedback sensitivity alongside predictive accuracy.

Select text to highlight · click a highlight to remove · saved in this browser only
Authors
Marc Schmitt
Your notes (browser-local)
saved
Cross-links
arXiv:2605.23978