Are the ratios in the backtester annualized ?

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Are the ratios in the backtester annualized ?

posted

1.) Are the ratios in backtester annualized? I asked the support team and he told me that they use the total returns not the annualized ones.
2.) If the ratios are not annualized, how to annualize them? You can just tell me a method for the Sharpe ratio.
3.) If I run backtest over a 10-year period (or maybe 5-year period), how do I know that my risk-adjusted measures are high enough and can be considered as a great algo? According to QuantStart, it tells us that an annualized Sharpe ratio should be larger than 2. But this is just for annualized ones.

2 responses

Simon Thornington

Best advice is to ignore all the numbers in the backtest, and just run a tear sheet on the backtest returns. The backtester IDE numbers cannot be trusted for anything.

Your question is timely. We are poised to overhaul the risk and performance metrics in the backtester. Our work is outlined in this post: https://www.quantopian.com/posts/feedback-requested-improvements-to-quantopians-risk-and-performance-calculations

Feedback welcome.

Thanks
Josh

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.