"10 Ways Backtests Lie" by Tucker Balch

by Tucker Balch, Co-founder and CTO of Lucena Research. From QuantCon NYC 2015.

"I’ve never seen a bad backtest” — Dimitris Melas, head of research at MSCI. Quantitative Analysts rely heavily on backtests as a means of validating their trading strategies. All too often, strategies look great in simulation but fail to live up to their promise in live trading. There are a number of reasons for these failures, some of which are beyond the control of a quant developer. But other failures are caused by common but insidious mistakes. In this talk I’ll review a list of 10 pitfalls in strategy development and testing that can result in optimistic backtests. I’ll also present methods for detecting and avoiding them. This talk will be of interest to quant developers and also non-quants who are interested to know what to look out for when presented with remarkably successful backtests.

The slides for this presentation can be found at https://www.slideshare.net/Quantopian/10-ways-backtests-lie-by-tucker-balch.

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