How we define performance?

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How we define performance?

edited Dec 14, 2014

I am a new bee here. after reading some post I have few questions. Question is when a quant call his algo perform better than SPY then we have no record about the transaction fee involved here.. If his or her algo is making $1 per transaction then does he/she subtracting the broker fee? Since most of the people are paying ~5 to 7$ to buy and sell a single stock. So overall per transaction they are losing 10 to 15$. Nobody has $1 million to buy SPY so they must be buying a max of 100 shares of SPY. So in their calculation do they count this number before coming to a conclusion that they over performed.

My understanding here is that a hedge fund manager has enough money to manipulate a stock. Normal trader deal with 100 share per transaction.

2 responses

Quantopian's backtesting engine has built in models to account for commission and slippage to make the simulations more realistic. The default commission used is $.03/share, but there's also 'per trade', 'per dollar', and minimum transaction costs models. It's always a good idea to look at the commission and slippage model used when assessing algorithm performance.

It's always a good idea to look at the commission and slippage model
used when assessing algorithm performance.

Yes, otherwise most the model claims that they outperform others. It would be nice to see how much realistic money was mode in real trade. Otherwise most algo will finish in some research paper.

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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.