Oops - I'm sorry. The formula should read: WFE=(OOS CAR/OOS Buy&Hold CAR) / (IS CAR/IS Buy&Hold CAR)
Greetings, Thomas > Hello! > > I think Pardo's WFE is questionable. How can you compare IS CAR with OOS > CAR if the concatenated IS and OOS periods are completely different? As an > example, let's assume that you're doing a walk-forward test with the first > IS period starting on, say, 01/01/1996 and ending 31/12/1999 and, > consequently, the first OOS period starting on 01/01/2000. Considering how > the markets developed from 2000, it's very probable that the IS CAR is > completely different from the OOS CAR until today as market conditions > changed dramatically. So comparing both CARs as absolute figures is like > comparing apples with oranges as different market condition will also > affect the performance of your trading system and, hence, the CARs over the > concatenated IS and OOS periods. > > In my opinion, a better and more reasonable (but still no perfect) approach > is comparing IS *Relative* CAR with OOS *Relative* CAR. The formula would > be: > > WFE=(IS CAR/IS Buy&Hold CAR) / (OOS CAR/OOS Buy&Hold CAR) > > Just my 2 cents. > > Thomas > > On Saturday 09 May 2009 05:03:16 dloyer123 wrote: > > --- In [email protected], Rajiv Arya <rajivary...@...> wrote: > > > I like to compute a ratio of the out-sample metric and divide it by the > > > in-sample metric. > > > > > > And I like to look for multiple runs of out-sample/in-sample ratio to > > > be above 0.5 and with little fluctuation. > > > > That is similar to Pardo's WFE (Walk forward efficiency), or a measure of > > how much curve fitting inflated test results. Pardo suggests taking the > > concatenated out of sample returns and divide by the result treating the > > entire combined data set as in sample. Anything below 0.65 will probably > > not trade well live. The higher, the better. > > > > > > > > > > > > > > > > ------------------------------------ > > > > **** IMPORTANT PLEASE READ **** > > This group is for the discussion between users only. > > This is *NOT* technical support channel. > > > > TO GET TECHNICAL SUPPORT send an e-mail directly to > > SUPPORT {at} amibroker.com > > > > TO SUBMIT SUGGESTIONS please use FEEDBACK CENTER at > > http://www.amibroker.com/feedback/ > > (submissions sent via other channels won't be considered) > > > > For NEW RELEASE ANNOUNCEMENTS and other news always check DEVLOG: > > http://www.amibroker.com/devlog/ > > > > Yahoo! Groups Links > > ------------------------------------ > > **** IMPORTANT PLEASE READ **** > This group is for the discussion between users only. > This is *NOT* technical support channel. > > TO GET TECHNICAL SUPPORT send an e-mail directly to > SUPPORT {at} amibroker.com > > TO SUBMIT SUGGESTIONS please use FEEDBACK CENTER at > http://www.amibroker.com/feedback/ > (submissions sent via other channels won't be considered) > > For NEW RELEASE ANNOUNCEMENTS and other news always check DEVLOG: > http://www.amibroker.com/devlog/ > > Yahoo! Groups Links > > >
