Backtesting bias and how to avoid it

Survivorship Bias

Insufficient Sample Bias

Look Ahead Bias

Timelessness and Temporal Bias

Data Release Timing Bias

Data-Mining Bias

Issues with Market Capitalization, Liquidity, or Moving the Market

Optimal Period Bias

Friction/Trading Costs

Conclusion

Backtesting is the process of calculating how an investment or trading strategy would have fared historically. It is widely u
Backtesting is the process of calculating how an investment or trading strategy would have fared historically. It is widely used to test and reject models and strategies.

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