- Title
- Pseudo-mathematics and financial charlatanism: the effects of backtest overfitting on out-of-sample performance
- Creator
- Bailey, David H.; Borwein, Jonathan M.; de Prado, Marcos López; Zhu, Qiji Jim
- Relation
- Notices of the American Mathematical Society Vol. 61, Issue 5, p. 458-471
- Publisher Link
- http://dx.doi.org/10.1090/noti1105
- Publisher
- American Mathematical Society
- Resource Type
- journal article
- Date
- 2014
- Description
- A backtest is a historical simulation of an algorithmic investment strategy. Among other things, it computes the series of profits and losses that such strategy would have generated had that algorithm been run over that time period. Popular performance statistics, such as the Sharpe ratio or the Information ratio, are used to quantify the backtested strategy’s return on risk. Investors typically study those backtest statistics and then allocate capital to the best performing scheme.
- Subject
- backtest; algorithmic investment strategy; profits; loss; out-of-sample performance
- Identifier
- http://hdl.handle.net/1959.13/1303607
- Identifier
- uon:20685
- Identifier
- ISSN:0002-9920
- Language
- eng
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