Backtest Overfitting in Financial Markets
We introduce two online backtest overfitting tools: BODT simulates the overfitting of seasonal strategies (typical of technical analysis), and TMST simulates the overfitting of econometric strategies (typical of academic journals). We show that econometric methods lend themselves to extreme levels of overfitting, casting doubt on most investment strategies published in academic journals.
WMU ScholarWorks Citation
Bailey, David H.; Borwein, Jonathan; Lopez de Prado, Marcos; Salehipour, Amir; and Zhu, Qiji Jim, "Backtest Overfitting in Financial Markets" (2016). Math Faculty Publications. 43.