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Online tools for demonstration of backtest overfitting

Bailey, David H. and Borwein, Jonathan M. and Salehipour, Amir (2015) Online tools for demonstration of backtest overfitting. (Submitted)

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    Abstract

    In mathematical finance, backtest overfitting means the usage of historical market data (a back- test) to develop an investment strategy, where too many variations of the strategy are tried, relative to the amount of data available. Backtest overfitting is now thought to be a primary reason why quantitative investment models and strategies that look good on paper often disappoint in practice. In this document we introduce two online tools, the Backtest Overfitting Demonstration Tool, or BODT for short, and the Tenure Maker Simulation Tool, or TMST, which illustrate the impact of backtest overfitting on investment models and strategies. This report describes BODT and TSMT, and the experiments they perform, together with technical details such as the evaluation metrics and parameters used.

    Item Type: Article
    Subjects: UNSPECIFIED
    Faculty: UNSPECIFIED
    Depositing User: Mrs Naghmana Tehseen
    Date Deposited: 28 Mar 2016 12:25
    Last Modified: 28 Mar 2016 12:25
    URI: https://docserver.carma.newcastle.edu.au/id/eprint/1691

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