Backtesting

Published

Journal Article

© 2015, Institutional Investor, Inc. All rights reserved. When evaluating a trading strategy, it is routine to discount the Sharpe ratio from a historical backtest. The reason is simple according to the authors: there is inevitable data mining by both the researcher and by other researchers in the past. In this article, the authors provide a statistical framework that systematically accounts for these multiple tests. They propose a method to determine the appropriate haircut for any given reported Sharpe ratio. They also provide a profit hurdle that any strategy needs to achieve in order to be deemed "significant."

Full Text

Cited Authors

  • Harvey, CR; Liu, Y

Published Date

  • September 1, 2015

Published In

Volume / Issue

  • 42 / 1

Start / End Page

  • 13 - 28

International Standard Serial Number (ISSN)

  • 0095-4918

Digital Object Identifier (DOI)

  • 10.3905/jpm.2015.42.1.013

Citation Source

  • Scopus