David H. Bailey

Lawrence Berkeley National Laboratory

Retired

1 Cyclotron Road

Berkeley, CA 94720

United States

http://www.davidhbailey.com

University of California, Davis

Research Associate

One Shields Avenue

Davis, CA 95616

United States

http://www.davidhbailey.com

SCHOLARLY PAPERS

15

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Top 339

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42,613

CITATIONS
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SSRN RANKINGS

Top 33,238

in Total Papers Citations

6

Scholarly Papers (15)

The Probability of Backtest Overfitting

Journal of Computational Finance (Risk Journals), 2015, Forthcoming
Number of pages: 34 Posted: 16 Sep 2013 Last Revised: 05 Jul 2015
Lawrence Berkeley National Laboratory, University of Newcastle (Australia), Lawrence Berkeley National Laboratory and Western Michigan University
Downloads 7,569 (571)

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backtest, historical simulation, probability of backtest over-fitting, investment strategy, optimization, Sharpe ratio, minimum backtest length, performance degradation

The Probability of Backtest Overfitting

Journal of Computational Finance, Forthcoming
Number of pages: 31 Posted: 21 Sep 2016
Lawrence Berkeley National Laboratory, University of Newcastle (Australia), Lawrence Berkeley National Laboratory and Western Michigan University
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backtest, overfitting, investment strategy, Sharpe ratio optimization, performance degradation

2.

Pseudo-Mathematics and Financial Charlatanism: The Effects of Backtest Overfitting on Out-of-Sample Performance

Notices of the American Mathematical Society, 61(5), May 2014, pp.458-471
Number of pages: 14 Posted: 12 Aug 2013 Last Revised: 05 Jul 2015
Lawrence Berkeley National Laboratory, University of Newcastle (Australia), Lawrence Berkeley National Laboratory and Western Michigan University
Downloads 6,523 (363)
Citation 1

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backtest, historical simulation, probability of backtest over-fitting, investment strategy, optimization, Sharpe ratio, minimum backtest length, performance degradation

3.

The Sharpe Ratio Efficient Frontier

Journal of Risk, Vol. 15, No. 2, Winter 2012/13
Number of pages: 36 Posted: 24 Apr 2011 Last Revised: 23 Apr 2014
David H. Bailey and Marcos Lopez de Prado
Lawrence Berkeley National Laboratory and Lawrence Berkeley National Laboratory
Downloads 5,519 (669)
Citation 4

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Sharpe ratio, Efficient frontier, IID, Normal distribution, Skewness, Excess kurtosis, Track record

4.

An Open-Source Implementation of the Critical-Line Algorithm for Portfolio Optimization

Algorithms, 6(1), pp.169-196, 2013
Number of pages: 29 Posted: 08 Jan 2013 Last Revised: 02 Jan 2016
David H. Bailey and Marcos Lopez de Prado
Lawrence Berkeley National Laboratory and Lawrence Berkeley National Laboratory
Downloads 1,969 (2,427)

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portfolio selection, quadratic programming, portfolio optimization, constrained efficient frontier, turning point, Kuhn-Tucker conditions, risk aversion

5.

Balanced Baskets: A New Approach to Trading and Hedging Risks

Journal of Investment Strategies (Risk Journals), Vol.1(4), Fall 2012
Number of pages: 44 Posted: 24 May 2012 Last Revised: 08 Sep 2012
David H. Bailey and Marcos Lopez de Prado
Lawrence Berkeley National Laboratory and Lawrence Berkeley National Laboratory
Downloads 1,909 (3,968)
Citation 1

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Trading baskets, hedging baskets, equal risk contribution, maximum diversification, subset correlation

6.

The Strategy Approval Decision: A Sharpe Ratio Indifference Curve Approach

Algorithmic Finance, (2013) 2:1, 99-109
Number of pages: 12 Posted: 15 Feb 2012 Last Revised: 20 Jan 2014
David H. Bailey, Marcos Lopez de Prado and Eva del Pozo
Lawrence Berkeley National Laboratory, Lawrence Berkeley National Laboratory and Universidad Complutense de Madrid (UCM)
Downloads 1,768 (5,223)

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Portfolio theory, Sharpe ratio, pairwise correlation, indifference curve, diversification

7.

Stop-Outs Under Serial Correlation and 'The Triple Penance Rule'

Journal of Risk, 2014
Number of pages: 35 Posted: 16 Jan 2013 Last Revised: 10 Jun 2016
David H. Bailey and Marcos Lopez de Prado
Lawrence Berkeley National Laboratory and Lawrence Berkeley National Laboratory
Downloads 1,565 (5,708)

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Downside, time under water, stop-out, triple penance, serial correlation, Sharpe ratio

8.

The Deflated Sharpe Ratio: Correcting for Selection Bias, Backtest Overfitting and Non-Normality

Journal of Portfolio Management, 40 (5), pp. 94-107. 2014 (40th Anniversary Special Issue).
Number of pages: 22 Posted: 01 Jul 2014 Last Revised: 05 Jul 2015
David H. Bailey and Marcos Lopez de Prado
Lawrence Berkeley National Laboratory and Lawrence Berkeley National Laboratory
Downloads 1,142 (5,044)

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Sharpe ratio, Non-Normality, Probabilistic Sharpe ratio, Backtest overfitting, Minimum Track Record Length, Minimum Backtest Length

9.

Statistical Overfitting and Backtest Performance

"Risk-Based and Factor Investing", Quantitative Finance Elsevier, 2015 (Forthcoming).
Number of pages: 10 Posted: 09 Oct 2014 Last Revised: 05 Jul 2015
Lawrence Berkeley National Laboratory, Northwestern University - Department of Engineering Sciences and Applied Mathematics, Lawrence Berkeley National Laboratory, Lawrence Berkeley National Laboratory and Lawrence Berkeley National Laboratory
Downloads 531 (19,033)

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backtest, historical simulation, backtest over-fitting, investment strategy, optimization, Sharpe ratio, performance degradation

10.

Online Tools for Demonstration of Backtest Overfitting

Number of pages: 13 Posted: 23 Apr 2015 Last Revised: 01 Dec 2015
Lawrence Berkeley National Laboratory, University of Newcastle (Australia), University of Newcastle, Australia, Lawrence Berkeley National Laboratory and Western Michigan University
Downloads 311 (38,154)

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Backtest overfitting, multiple testing, Sharpe Ratio, Deflated Sharpe Ratio, investment strategy

11.

Mathematical Appendices to: 'Stop-Outs Under Serial Correlation'

Journal of Risk, 2014, Forthcoming
Number of pages: 13 Posted: 20 Oct 2014
David H. Bailey and Marcos Lopez de Prado
Lawrence Berkeley National Laboratory and Lawrence Berkeley National Laboratory
Downloads 228 (80,441)

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Downside, time under water, stop-out, triple penance, serial correlation, Sharpe ratio

12.

Mathematical Appendices to: 'The Probability of Backtest Overfitting'

Journal of Computational Finance (Risk Journals), 2015, Forthcoming
Number of pages: 8 Posted: 23 Feb 2015 Last Revised: 05 Jul 2015
Lawrence Berkeley National Laboratory, University of Newcastle (Australia), Lawrence Berkeley National Laboratory and Western Michigan University
Downloads 170 (50,274)

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backtest, historical simulation, probability of backtest over-fitting, investment strategy, optimization, Sharpe ratio, minimum backtest length, performance degradation

13.

Evaluation and Ranking of Market Forecasters

Number of pages: 26 Posted: 03 Apr 2017 Last Revised: 22 Jul 2017
Lawrence Berkeley National Laboratory, University of Newcastle (Australia), University of Newcastle, Australia and Lawrence Berkeley National Laboratory
Downloads 0 (11,887)

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Marker forecasters ranking; Guru ranking; Market forecast

14.

Stock Portfolio Design and Backtest Overfitting

Number of pages: 16 Posted: 29 Feb 2016 Last Revised: 20 Jul 2016
Lawrence Berkeley National Laboratory, University of Newcastle (Australia) and Lawrence Berkeley National Laboratory
Downloads 0 (9,195)

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backtest, historical simulation, probability of backtest overfitting, investment strategy, optimization, Sharpe ratio, minimum backtest length, performance degradation

15.

Backtest Overfitting in Financial Markets

Automated Trader, 2016, Forthcoming
Number of pages: 8 Posted: 15 Feb 2016
Lawrence Berkeley National Laboratory, University of Newcastle (Australia), Lawrence Berkeley National Laboratory, University of Newcastle, Australia and Western Michigan University
Downloads 0 (17,923)

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backtest, historical simulation, probability of backtest over-fitting, investment strategy, optimization, Sharpe ratio, minimum backtest length, performance degradation