Pseudo-Mathematics and Financial Charlatanism¶

Bailey, D. H., Borwein, J. M., López de Prado, M., & Zhu, Q. J. (2014). Pseudo-Mathematics and Financial Charlatanism: The Effects of Backtest Overfitting on Out-of-Sample Performance. Notices of the American Mathematical Society, 61(5), 458-471.

Type: Journal article
Intellectual base: Primary research
Year: 2014
DOI: 10.1090/noti1105
Link: https://doi.org/10.1090/noti1105
Cited from: data_science, statistics_experimental_design

Cited by¶

3 citations across 3 artifacts.

Each citation links to the sentence it supports in the citing article.

Primes¶

Data Leakage
- In finance, a strategy backtested with look-ahead bias — restated earnings, survivorship-filtered universes, future fundamentals — looks profitable in backtest and disappoints live.
  This sourceShows how look-ahead bias and backtest overfitting inflate in-sample returns that collapse live, the finance analogue of temporal target leakage.
Proxy–Target Fidelity
- In finance, a credit rating proxies for default probability and a backtest proxies for live strategy performance.
  This sourceShows a strategy's backtest (in-sample) performance is a poor proxy for live (out-of-sample) performance, easily inflated by overfitting — the proxy-target fidelity failure between a backtest and live trading.
Researcher Degrees of Freedom
- In financial backtesting, strategy researchers explore hundreds of variants on the same historical data and report the best, the pattern known there as backtest overfitting.
  This sourceFormalizes backtest overfitting and the deflated Sharpe ratio correcting for the number of trials.

Verification¶

This reference passed the adversarial substantiation pipeline: it was checked to exist and to support the claim it is attached to. See how references were verified.

Links previously used in the corpus¶

Before the registry existed this work was also linked 1 other way.

https://www.ams.org/notices/201405/rnoti-p458.pdf ×2

Registry ID ref:93d64b7def30 · see in the full table