Main points:
- backtesting is an attempt to learn the future by looking at the past
- the connection between past and future is chaotic
- if we look at the wealth curve of a backtest, everything we infer about that result could be wrong
- mimicking the backtest with random trades provides a true picture of when the strategy works and when it doesn’t
- it is useful to do the backtest with multiple starting portfolios
- the only truly out-of-sample test is real trading
- herd risk is a problem
- we played the minority game
- optimism bias is a problem
Presented 2010 November at the Thalesians.
There is a video of the talk on the Thalesian website (towards the bottom).
Kommentarer inaktiverade för Effective Backtesting
jun 25, 26
How to have a better chance of a good outcome. Making mistakes There’s been a lot of talk recently about data analysis problems with spreadsheets. If you’ve not stuck your [...]
jun 25, 26
The AllTrials campaign is pushing for all data on drug trials to be made public -- see the campaign statement. If the public has all the evidence rather than a [...]
jun 25, 26
Here is an interview with Ron Hochreiter, Assistant Professor at WU Vienna University Economics and Business. In 25 words or less tell us what you do (using German words is [...]