Back test

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Back Test

To use past data to predict future events. Researchers use back testing to find relationships between apparently unrelated events and determine if one causes the other. One may conduct back testing to inform one's investment decisions or strategy, though the practice is not always accurate because a great number of inputs cause economic events.

Back test.

A back test simulates the investment return that an investment strategy would have produced over a specific period.

For example, someone who wanted to evaluate a strategy of buying after stock splits might test the effect of having purchased 500 additional shares in the large-cap stocks in a hypothetical portfolio each time one of the stocks split during the period from 1957 to the present.

Back testing is sometimes used to support a current investment strategy by demonstrating that it would have enjoyed strong past performance. Critics point out that the testing period that's chosen has a significant impact on the results and that past performance doesn't guarantee future returns.

References in periodicals archive ?
For over 30 years, the world's largest investment banks, asset managers, proprietary traders and universities have relied upon Tick Data's research-ready historical intraday stock, futures, options and forex data to back-test trading strategies, develop risk and execution models, perform post-trade analysis, and conduct important academic research.
One can back-test the strategies after they are developed and paper-trade the strategies and then, these strategies can be made available to in-house traders as well as active-traders & sophisticated HNI/retail investors.
Each of these three key categories can be given priority rankings so back-test results reflect the overall desires of the investor.
In our back-test, the index's positive returns since 1989 corresponded to significant declines in the S&P 500 such as around the time of the collapse of Long Term Capital Management in 1998, following the attacks on September 11, 2001, and during the Gulf War in 1990.
Our 32-year deep back-test programs and quantitative watch-list design just proves that to be true.
The upgrade also expands Macroaxis's popular portfolio suggestion feature, where users can find much better alternatives to their existing holdings and back-test them in real time to verify assumptions.
Reuters NewsScope Archive lets customers replay stories as they unfolded in the market, allowing them to back-test or fine tune their trading strategies in response.
today unveiled Strategy Center, a comprehensive suite of technical analysis tools available for active traders that give them the power to both back-test customized trading strategies and simultaneously scan the market for stocks that are meeting those strategies.
Customers, who include broker/dealers, hedge funds, and proprietary trading firms, can use the product to back-test trading strategies, evaluate risk/return models, and perform sophisticated research on all aspects of options investment.
By offering comprehensive securities information in an easy-to-use format, PlusTick can help clients to more effectively comply with "best trade execution" and other government mandates, and back-test and analyze algorithmic trading applications designed to improve investment performance.
Ability to Back-Test and Refine Strategies: Using hypothetical management strategies, users can back-test to uncover what rankings might have been based on the quantitative and qualitative data provided.
However, the majority of the outstanding issues of preferred shares and hybrid securities remained unaffected by financial distress, and only a fraction of the outstanding issues of preferred or hybrids were thus included in the back-test.