RE: [amibroker] The demise of 23 systems...

["Herman vandenBergen" <psytek@xxxxxxxx>]

<FONT face=Arial color=#0000ff 
size=2>Thanks for sharing this with us Chuck, I am not completely 
surprised because some years ago I went through a similar experience. I think 
one way around this is to create a watch list of mature NASDAQ stocks that 
have been around for your entire backtesting period and use those for 
development. When design is complete (is it ever?) test it on the other 
securities.
<FONT face=Arial color=#0000ff 
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<FONT face=Arial color=#0000ff 
size=2>herman.
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<SPAN 
class=420553912-30122003> -----Original Message-----From: 
Chuck Rademacher [mailto:chuck_rademacher@xxxxxxxxxx]Sent: December 
30, 2003 8:05 PMTo: amibroker@xxxxxxxxxxxxxxxSubject: 
[amibroker] The demise of 23 systems...

  I 
  thought that I would share the following with you.  Perhaps you can 
  see how the results of my research may affect your own 
  systems?
  <FONT face=Arial color=#0000ff 
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  I 
  had what I thought to be 23 "good" to "very good" systems that I backtested 
  against a current NASDAQ 100 watchlist.   After spending 
  two days updating symbols and accounting for de-listed stocks, I came up with 
  nine separate watchlists, as at January 1 each year between 1995 and 
  2003.   Thanks to some of you, I modified my AFL to make sure that I 
  used the correct watchlist depending on the date.   The results... 
  not one of my 23 NASDAQ 100 systems now backtest with acceptable 
  performance.  Many went from nice, positive returns with low drawdowns to 
  negative returns and almost total loss of capital.
  <FONT face=Arial color=#0000ff 
  size=2> 
  What 
  does it all mean?   IMO, working with only a current NASDAQ 100 
  watchlist can give you a real sense of false security.   Not only 
  are de-listed stocks not in the current list, but many of those de-listed 
  stocks had lacklustre performance before their demise.
  <FONT face=Arial color=#0000ff 
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  I 
  encourage you to think about the impact of using only a current watchlist, 
  regardless of how that list is constructed, for backtesting 
  purposes.   I see it all the time.   System designers 
  create watchlists of high-beta or high-yield or low P/E or whatever stocks 
  based on current information to backtest a system starting perhaps five years 
  ago.   Think about it!Send BUG 
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