Beware simulation sins

Aspect Capital’s Stephen Wood picks out the most common pitfalls in simulations of quantitative investment strategies

Stephen Wood, AspectCapital
Stephen Wood, Aspect Capital

Stephen Wood is senior product manager at Aspect Capital. The ability to simulate the performance of a trading strategy back through time is one of the key benefits of systematic investing, yet it is a process loaded with potential hazards. Simulation makes a scientific approach to investment research possible, and enables the testing of strategies or hypotheses on a range of markets and market environments. However, while building a strategy that is profitable in simulation is deceptively e