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 ?
In VaR estimation we chose the time window (WE) according to the Backtests based on the VaR violations (VR) and the coverage tests proposed by Christoffersen (1998) and Candelon et al.
In addition, HyperQuant platform will start to gather and analyze trading data in order to use it within the HyperQuant app and for trading strategies and machine learning algorithms backtests.
And regarding firms publishing backtests of their signals, Doris pointed out that it's really important to know whether trading costs have been taken into account.
It's uncertain how bond ETFs will behave when the interest rate regime changes, which has already begun, and backtests for new funds reflect a limited history when rates were extremely low due to central bank policies, which are in the process of ending, says Yoo.
Hedging backtests show a significant reduction in several risk metrics applied to the weekly hedging error.
Backtests of 7046 companies in the Central Asian region show returns of 45.8% in excess of the regional benchmark and 45.4% in excess of the S&P for the 15 year period ending December 31, 2014.
Figure 1 (previous page) plots an index of the RAFI US Large Cap strategy, calculated by Russell Investments with backtests from 1996 to 2005, versus the S&P 500 and the Russell 1000 Value Index.
FXCM Holdings LLC, a global leader in online forex and CFD trading,* recently launched Strategy Trader** -- a free, all-in-one automated forex trading solution that allows clients to code strategies, perform advanced backtests, run detailed optimization analysis, and execute trades from a single platform.
In order to evaluate the model performance, we perform backtests at the industry level.
A concluding section "backtests" Sarbanes-Oxley against such financial scenarios as Enron, WorldCom and the current economic crisis.
Most of these backtests focus on the frequency of losses exceeding a VaR (see, e.g., Kupiec, 1995; Christoffersen, 1998), but more sophisticated backtests compare sets of complete density forecasts against subsequently realized outcomes (e.g., Berkowitz, 2001).