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Avoiding Backtesting Overfitting by Covariance-Penalties: An Empirical Investigation of the Ordinary and Total Least Squares Cases
Systematic trading strategies are rule-based procedures which choose portfolios and allocate assets. In order to attain certain desired return profiles, quantitative strategists must determine a large array of trading parameters. Backtesting, the attempt to identify the appropriate parameters using historical data available, has been highly criticized due to the abundance …