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 ?
Trade strategy development and backtesting have been core functionalities available in CQG Integrated Client (CQG IC), the company's flagship trading product.
CHICAGO, May 5, 2011 /PRNewswire/ -- For the past two decades, Zacks Investment Research has been helping traders and investors beat the market with independent analysis and innovative products such as the Research Wizard, their stock-picking and backtesting program, and the Zacks Rank, a stock rating system whose Strong Buy recommendations have generated an average annual return of over 27% since 1988.
App streamlines backtesting and risk assessment of illiquid OTC derivatives and To-Be-Issued structures, allowing risk managers, structurers, and investors to generate mark-to-model historical prices for calculating VaR (Value at Risk), and CVA (Counterparty Credit Adjustments), and zeroing in on optimal structures for OTC instruments orders of magnitude faster than current products
Integrated backtesting database extends quantitative analysis and backtesting models with extensive population, as well as periodicity coverage.
As well as full quantitative analysis and backtesting of each methodology, the authors go on to propose a new style model for style and implicit VaR, complete with analysis, real life examples and backtesting.
CHICAGO -- Kevin Matras goes over the importance of Screening and Backtesting.
These strategies were with and backtested in the Research Wizard stock screening and backtesting program.
The performance calculations for the Profit Track strategies were produced through the backtesting feature of the Research Wizard using the DBCMHIST database and consist of the total return (price changes + dividends) of an equal weighted portfolio.
But even more essential, I'm going to explain why backtesting is the most important step of all.
Backtesting and automated program trading tools deliver a competitive edge to Active Traders
Backtesting is simply a way of determining whether a particular stock picking strategy generally picks stocks that go up once they've been identified as opposed to picking stocks that get buried once they've been identified.
CHICAGO -- Zacks Investment Research, today announced that it would integrate trade execution into its Research Wizard screening and backtesting software through an alliance with MB Trading (MBT), the trading firm ranked tops in trade execution and #1 overall by Barron's annual brokerage ranking.