How should you discount your backtest PnL?

5 February 2019

Social sharing

Share via Twitter Share via LinkedIn Share via Email

In-sample overfitting is a drawback of any backtest-based investment strategy. It is thus of paramount importance to have an understanding of why and how the in-sample overfitting occurs. In this article we propose a simple framework that allows one to model and quantify in-sample PnL overfitting. This allows us to compute the factor appropriate for discounting PnLs of in-sample investment strategies.


Adam Rej , Philip Seager , Adam Rej

Related articles