The False Strategy theorem tells us that the optimal outcome of an unknown number of historical simulations is right-unbounded — with enough trials, there is no Sharpe ratio sufficiently enough to reject the hypothesis that a strategy is false. Given the ease with which one can use a computer...

In the field of mathematical finance, a “backtest” is the usage of historical market data to assess the performance of a proposed trading strategy. It is a relatively simple matter for a present-day computer system to explore thousands, millions or even billions of variations of a proposed...

We introduce two online backtest overfitting tools: BODT simulates the overfitting of seasonal strategies (typical of technical analysis), and TMST simulates the overfitting of econometric strategies (typical of academic journals). We show that econometric methods lend themselves to extreme...