Quant Overview & Backtesting Flashcards
Describe how quantitative analysis fits into the investment workflow of our clients Identify what types of clients would use a quantitative application Explain the importance of backtesting Write a backtestable code in Screening
1
Q
What is backtesting?
A
- Identify factors that describe a subject (e.g.startegy) and test to see how well they would have performed ex-post.
2
Q
What are two biases to account for when backtesting?
A
- Survivorship bias.
- Look-ahead bias.
3
Q
What is survivorship bias?
A
- –Survivorship bias occurs when historical results are biased because only companies that have survived up to the present time are included.
4
Q
What is look-ahead bias?
A
- –Look-ahead bias occurs when the model uses information that would not have been available on the test day.
5
Q
How can we account for survivorship bias?
A
- Include inactive securities.
6
Q
How can we account for look-ahead bias?
A
- Lag fundamentals data, when necessary.
7
Q
Which FactSet library takes into account of statistical biases?
A
- The Quant Factor Library (QFL).
