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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
For automated trading, traders can set up and back-test different strategies.
Tick Data offers 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 used by investment banks, asset managers, proprietary traders and universities.
Third, we back-test the market risk measures with the original incomplete historical panel of observable prices to verify the reliability of the estimates.
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.
"The fixed-income market is becoming more and more efficient, therefore we needed a technology that would enable us to detect the most brief price patterns and to back-test our strategies on large histories of intra-day data." commented MUSI.
In addition the software allows users to back-test any stock or mutual fund to see how the system would have performed over any time period.
In addition, the new trading platform provides active customers with nearly 500,000 bars of historical data and the capability to back-test utilizing both ask and bid prices.
These changes were back-tested against patient screening logs and were designed to facilitate enrollment and broaden the applicable market for CytoSorb.
Oppenheimer was selected for its ability to explain technical analysis in a manner that is simple, easy-to-understand, and includes back-tested performance statistics.
Oppenheimer's selection was based on its ability to explain technical analysis in a manner that was simple, and included back-tested performance statistics.
A surprising aspect of this search was the frequency with which many advisers used three phrases: "back-tested," "The Brinson Study," and "best practices."