The Motley Fool Discussion Boards
Investing/Strategies / Mechanical Investing
|Subject: Re: Blending at a Whole New Level||Date: 7/24/2008 8:06 PM|
|Author: elann||Number: 211476 of 258147|
This flashes my curve fitting warning light.
I agree that this process adds a bit more room for curve fitting, but there aren't
really a lot of degrees of freedom, since this is (as I understand it)
entirely a step-forward test. At each month you're using only screen
performance data for periods prior to that date.
What you're describing is the lack of a look-ahead bias, i.e. crystal ball, which is true.
What I'm describing is a different issue. Let's say you have two screens A and B, and A performs slightly better over the whole test period. Now you perform some random process to split the test period into alternating subperiods (simulating a timing signal). You call the two sub-series "bull" and "bear". Then you test both screen A and B in the bull and bear periods separately, and pick out the one that performed better in each period. You have created two new opportunities to outperform A alone - one wh