# Improving Machine Learning Performance with Synthetic Augmentation

arXiv: https://arxiv.org/abs/2604.14498 · HTML: https://mlsanity.com/paper/2604.14498/

## Key facts

- Cited by 1 papers in the map (data through 14 Oct 2026).
- Builds on 5 of its 19 references that are in the map.
- First posted on arXiv 16 Apr 2026.

## Builds on (most cited first, 5 of 5)

- [Denoising Diffusion Probabilistic Models](https://mlsanity.com/paper/2006.11239/) (2020)
- [Autoregressive Denoising Diffusion Models for Multivariate Probabilistic Time Series Forecasting](https://mlsanity.com/paper/2101.12072/) (2021)
- [Quant GANs: Deep Generation of Financial Time Series](https://mlsanity.com/paper/1907.06673/) (2019)
- [A Kernel Theory of Modern Data Augmentation](https://mlsanity.com/paper/1803.06084/) (2018)
- [Time Series (re)sampling using Generative Adversarial Networks](https://mlsanity.com/paper/2102.00208/) (2021)

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

- [Should I Use This Synthetic Dataset for Training? How to Test with Minimal Real Data](https://mlsanity.com/paper/2608.27996/) (2026)

## Abstract (arXiv)

Synthetic augmentation is increasingly used to mitigate data scarcity in financial machine learning, yet its statistical role remains poorly understood. We formalize synthetic augmentation as a modification of the effective training distribution and show that it induces a structural bias--variance trade-off: while additional samples may reduce estimation error, they may also shift the population objective whenever the synthetic distribution deviates from regions relevant under evaluation. To isolate informational gains from mechanical sample-size effects, we introduce a size-matched null augmentation and a finite-sample, non-parametric block permutation test that remains valid under weak temporal dependence. We evaluate this framework in both controlled Markov-switching environments and real financial datasets, including high-frequency option trade data and a daily equity panel. Across generators spanning bootstrap, copula-based models, variational autoencoders, diffusion models, and TimeGAN, we vary augmentation ratio, model capacity, task type, regime rarity, and signal-to-noise. We show that synthetic augmentation is beneficial only in variance-dominant regimes, such as persistent volatility forecasting-while it deteriorates performance in bias-dominant settings, including near-efficient directional prediction. Rare-regime targeting can improve domain-specific metrics but may conflict with unconditional permutation inference. Our results provide a structural perspective on when synthetic data improves financial learning performance and when it induces persistent distributional distortion.