Mathematical Appendices to: 'The Probability of Backtest Overfitting'
Journal of Computational Finance (Risk Journals), 2015, Forthcoming
8 Pages Posted: 23 Feb 2015 Last revised: 5 Jul 2015
Date Written: February 22, 2015
We carry out several test cases to illustrate how the Probability of Backtest Overfitting (PBO) performs under different scenarios. We also assess the accuracy of PBO using two alternative approaches (Monte Carlo Methods and Extreme Value Theory).
The paper "The Probability of Backtest Overfitting" to which these Appendices apply is available at the following URL: http://ssrn.com/abstract=2326253
Keywords: backtest, historical simulation, probability of backtest over-fitting, investment strategy, optimization, Sharpe ratio, minimum backtest length, performance degradation
JEL Classification: G0, G1, G2, G15, G24, E44
Suggested Citation: Suggested Citation