Exercise 1 · 15 min

Seven Ways a Stat-Arb Backtest Lies

Time: 20 to 25 minutes · You'll need: a calculator and Lesson 1's checklist table · Builds on: Lesson 1

Warm-up

Check yourself

A study signals on the close of bar t and fills at the open of bar t+1. Which lie does that avoid?

Check yourself

Which of these errors could make a reported Sharpe lower than the honest one?

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