Measuring performance
Out-of-sample testing
Checking a strategy on data that was not used to design it.
How it works
The rule is developed on one slice of history and tested on another it has never seen. A strategy that works in-sample and fails out-of-sample was fitted to noise.
True out-of-sample testing means forward testing on data that did not exist when the rule was written. Everything else is partially contaminated by the researcher already knowing what happened.
Related terms
More in Measuring performance
- Nominal return
- Performance attribution
- Money-weighted return
- Price return
- Mark to market
- Real return
- Realised profit and loss
- Information ratio
All 29 Measuring performance terms · The full glossary, 433 terms
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