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Shorts backtest simulations.
Pablo Lopez
posted Aug 29, 2017

Hi everybody,

I'm Pablo and I am fairly new to Quantopian but with a bit of experience in financial markets.

There's a question about the backtester that I would like to share with you.

Given the emphasis given by Quantopian to market neutral strategies, there are plenty of algorithms that use one or another version of hedging by getting short on some stocks, sometimes with incredibly good results.

I would like to know how costs and restrictions related to shorting securities are taken into account in the backtester. I mean uptick rule, borrowing costs and other regulation/market restrictions.

In case none of them are taken into account, do you have an idea of what could be the impact of these costs and restrictions when trading a long-short trading strategy for real, presumably with a fairly high turnover?

My intuition is that some strategies might be seriously affected by the "short rebate". So.. can anybody help me with my doubt ?

Thanks!

2 responses
Viridian Hawk
Aug 29, 2017

Yeah, it's a huge shortcoming of the backtester. It doesn't model any restrictions or costs associated with shorting.

Pablo Lopez
Aug 29, 2017

Thank you Viridian! That's what I was afraid of!

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