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Past performance may not be a guarantee of future performance, but it's all we've got to work with.
by theorique 14y ago
Past performance may not be a guarantee of future performance, but it's all we've got to work with.
- phreeza 14y agoThere are more, statistically sounder methods that could be used to search the space of possible strategies, a la bootstrapping. These could be used to make more meaningful statements about the strategy, if the assumption is that previous statistics predict future statistics, which of course might also be false (black swans, etc.) Given the vast amount of parameters that constitute a strategy, naive optimizing of the outcome of the strategy in the past is bound to produce overfitting in the majority of cases...
- adg001 14y agoActually, this is not accurate. Before relying on our models, we get also the opportunity to validate them by checking at what extent they successfully predicts future data points. Simply for the next t-time periods let the model give the user an estimate of the future prices/rates, together with an estimate of how accurate the model expects these predictions to be. This would allow the user to build confidence in the algorithm strategy she/he came up with, before employing it on the open market.
- theorique 14y agoI mean it in the naive sense - we can observe the past but not the future. It definitely makes sense to paper trade a strategy and see its predictiveness in real time.