Broken backtests leave quant researchers at a loss
As historical data loses relevance, quants must find new ways to validate their theories
Investment prospectuses famously contain the standard disclaimer that past performance is no guarantee of future returns. It’s a rider that is usually ignored – even by those in the industry.
“The truth is, most investors treat past performance as the one and only guide to future returns,” says Anthony Morris, who heads quantitative strategies at Nomura.
Quant strategies in particular are built using backtests, which show how they would have performed during long tracts of history.
Backtest
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