# The Nonstationarity-Complexity Tradeoff in Return Prediction

arXiv: https://arxiv.org/abs/2512.23596 · HTML: https://mlsanity.com/paper/2512.23596/

## Key facts

- Cited by 1 papers in the map (data through 14 Oct 2026).
- First posted on arXiv 29 Dec 2025.

## Built on by (most cited first, 1 of 1)

- [Adversarial Training for Deep Hedging in Nonstationary Markets](https://mlsanity.com/paper/2610.07162/) (2026)

## Abstract (arXiv)

Does more data improve return prediction? In non-stationary financial markets, longer training windows improve prediction of complex models but incorporate outdated economic regimes, whereas simpler models require less data and are less vulnerable to changes in economic conditions. We formally characterize this nonstationarity-complexity tradeoff, showing that model complexity and training window length must be jointly optimized. We propose an adaptive selection procedure with formal performance guarantees. Over three decades of U.S. equity markets, our method improves out-of-sample R2 on industry portfolios by 14% relative to fixed-window and regime-switching benchmarks, with large gains during recessions.