Same Error, Different Function: The Optimizer as an Implicit Prior in Financial Time Series

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Authors: Federico Vittorio Cortesi, Giuseppe Iannone, Giulia Crippa, Tomaso Poggio, Pierfrancesco Beneventano
Cited by: 0
References: 55

Abstract

Neural networks applied to financial time series operate in a regime of underspecification, where predictors achieve comparable out-of-sample error. Using large-scale volatility forecasting for S&P 500 stocks--twelve architecture-optimizer configurations, thirteen seeds each, evaluated on 564,795 held-out observations--we show that comparable test loss conceals measurably different predictors. In eleven of twelve comparisons, models trained from identical initialization and identical data order diverge $1.3$ to $7.8$ times further than repeated runs of either optimizer alone, ruling out initialization noise as the explanation. On a common scale, predictions differ by 5--17\% of the typical forecast error while the models' error magnitudes differ by less than 0.7\% of it. The divergence reshapes nonlinear response profiles, temporal dependence, and ultimately decisions: volatility-ranked portfolios trace a Sharpe-turnover frontier with up to 58\% turnover dispersion at comparable gross Sharpe ratios. In underspecified settings, optimization is a consequential source of inductive bias, and model evaluation must extend beyond scalar loss to functional and decision-level behavior.

Fields of Study & Subjects

Stock Market Forecasting Methods Financial Risk and Volatility Modeling Forecasting Techniques and Applications

Publication details

Journal / source
arXiv (Cornell University)
Publication date
3 March 2026
Language
EN
Document type
Preprint