Matvey Kiriakov

The sign of the selected candidate's P&L conflates the level of the test period with the quality of selection

The standard walk-forward step reports the sign of the out-of-sample (OOS) P&L of a single candidate: the one the selection rule ranked first in-sample (IS). That sign conflates two facts: what kind of period the test period was for the whole candidate set, and whether the select...