The Golden Age of Backtests

Today’s must read is written my colleague Ben Carlson, Director of Institutional Asset Management at RWM.

Ben explains the 10 things you cannot learn from a backtest. A quick list of those 10 items:

10 Things You Can’t Learn From a Backtest
1. How many bad backtests came before the good ones?
2. Data availability at the time.
3. What the frictions were.
4. The difference between % returns and dollars invested.
5. How to optimize life.
6. How it feels to put real money to work.
7. An itchy trigger finger.
8. How it feels to lose money.
9. How to avoid overconfidence.
10. What’s going to happen in the future.

You must go read the entire thing, where all the good stuff is in explanatory details.

Great stuff, Ben!

 

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