macrocephalopod

This is awesome, I like the idea of plotting sharpe as a function of parameter setting to find the sweet spot... good to bet on multiple settings tho for robustness. Since this series randomm,Any xtra steps u do to scrutinize whether it works bc of luck? Or is that always a risk

1. Don’t do any of these steps

Are you saying, dont try to find simple tendencies like this? I think maybe it's worth exploring, bc if the asset remains stable you can make money in theory

1. Don’t look for the thing you’re testing 2. Don’t overfit parameters based on the thing you’re targeting 3. Don’t simply select the best parameter value from one historical test 4. Understand max theoretical sharpe ratio for a given strategy (# indie bets)

Never tried 4, how do you calculate that? For 2&3, isnt it true that you have to pick parameters at a certain pt to run the strat? If so, may as well optimize w history, avg bets betw top 3 parameterVals, check sensitivity to param not too high. For 1, what should we do instd?

Is number 4 related to Grinold & Kahn IR = IC x sqrt (breadth)

Yup

So this is what not to do, instead do we need to start from an economic thesis and try to linearly model some future excess returns based on particular input variables? Is there truly no pt in testing the consistency of certain simple/naive tendencies/patterns 1/2