Academic shines light on data mining in alternative beta
Sharpe ratios on complex products fall 73% compared with backtests
If systematic investing has one obvious weakness it is the problem of over-fitting – shaping strategies too closely to fit historical data, and so dooming them to underperform when put to work in reality.
There have been multiple studies to show over-fitting exists in the industry, but until recently the precise scale of the problem has been hard to pin down.
Academic Antti Suhonen – a professor of finance at Aalto University in Finland and former banker – has sought to do just that. His
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