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Posts tagged ‘optimization’

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A Reality Check for Data Snooping (paper)

Do we really know what we think we know?   White’s famous paper on his “Reality Check” procedure:

“Data Snooping occurs when a given set of data is used more than once for purposes of inference or model selection.  When such data reuse occurs, there is always the possibility that any satisfactory results obtained may simply be due to chance rather than to any merit inherent in the method yielding the results.  Our new procedure, the Reality Check, provides simple and straightforward procedures for testing the null that the best model encountered has no predictive superiority over a given benchmark model…”

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Monte Carlo Resampling of Equity Curves Using N-Bar Segments (paper)

Very readable paper on MC resampling techniques.  Classic MC techniques tend to generate smoother equity curves with shallower drawdowns than actual live results, as  they “chop up” returns too finely, thereby reducing the impact of correlation during Black Swan events.  The paper presents a simple method which attempts to preserve these correlations (click on title to view paper).

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Global Optimization Algorithms: Theory and Application (e-book)

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Data Mining Bias: The Risk of Picking an Inferior Rule