PT - JOURNAL ARTICLE AU - Campbell R. Harvey AU - Yan Liu TI - Backtesting AID - 10.3905/jpm.2015.42.1.013 DP - 2015 Oct 31 TA - The Journal of Portfolio Management PG - 13--28 VI - 42 IP - 1 4099 - https://pm-research.com/content/42/1/13.short 4100 - https://pm-research.com/content/42/1/13.full AB - When evaluating a trading strategy, it is routine to discount the Sharpe ratio from a historical backtest. The reason is simple according to the authors: there is inevitable data mining by both the researcher and by other researchers in the past. In this article, the authors provide a statistical framework that systematically accounts for these multiple tests. They propose a method to determine the appropriate haircut for any given reported Sharpe ratio. They also provide a profit hurdle that any strategy needs to achieve in order to be deemed “significant.”TOPICS: Statistical methods, portfolio management/multi-asset allocation