How backtest overfitting in finance leads to false discoveries
The present author, together with Marcos López de Prado, has just published the article How backtest overfitting in finance leads to false discoveries in Significance, a journal of the British Statistical Society. The published article is now available at the Significance (Wiley) website.
This article is condensed from the following manuscript, which is freely available from SSRN: Finance is Not Excused: Why Finance Should Not Flout Basic Principles of Statistics.
This paper introduces the problem of backtest overfitting in finance to the general reader who may be trained in the basics of statistics but not necessarily familiar with the application of statistics to finance or the dangers of backtest overfitting and selection bias under multiple testing.
Here is a brief summary of the key points of the article. See the published article or the SSRN manuscript for additional details:
