Optimizing a Trading Strategy without Backtesting the Alpha

Using a Synthetic Alpha to Remove the Composite Hypothesis Problem

Backtesting, Alphas and Trading Strategies

For quants, trading is the process of repetitively taking positions in the markets as a function of information known about the future distribution of the returns of an asset. In the process of analyzing this, I generally draw a distinction between:

  1. alphas, which is formally the expected mean of…

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