backtesting fundamentals

Discussion in 'Trading Software' started by Vishnu, Aug 21, 2002.

  1. Vishnu


    Are there any good software packages out there for backtesting both technicals and fundamentals? For instance, I'd like to be able to ask questions like: what statistically has happened when a stock with < 10 P/E and 0 debt breaks its 200 days moving average. Stuff like that.

    Also, anyone know of a database containing comprehensive historical corporate bond data?

    Thanks in advance.
  2. Shankar


    If you have the data you should be able to do it in WL. Let me know your testing results and where you got the data from.
    But who knows whether the P/E is on real or fake numbers.:D

  3. nljones5


    I thought I'd keep this thread alive by posting another question. Can anybody recommend a backtesting program/site/subscription for testing e-mini that a beginner could easily use?
  4. I used to work for a company that collected all that data, and the data is very difficult to get and maintain. . . due to the unstandardized financial statements. . . . so mostly for the hard work, which requires of people to maintain the data banks, the prices are high enough that only large commercial investment houses can afford the data. . .

    However, if you pick some stocks that you like to follow, the best you can do is to download the 10q and k's and build your own database. . . however the best way to approach this problem is to pick a market segment, with as many stocks as you can deal with, then build a database that calculates the TEV (Total Enterprise Value = Market Capitalization + Debt - Cash) multiples to cash flow and revenues, and then look at the ratios relative to each other, and you can see when some of the stocks get out of line with the market leaders, and then trade to catch up. . . .

    That was essentially how some black box traders did it back in the early 90's and there was a Barron's article about it years and years ago, and Merriwether said it was pretty uncannily accurate.

    big undertaking. . . i know standard and poors has the data, also Thomson Financial

  5. Backtesting is a very hard subject.

    First, there's the over-optimization factor. What worked best in the past doesn't guarantee it will happen in the future. Still, there are systems that constantly optimize their system, to fit the market condition, which works. Chuck Le Beau has good insights about it.

    Second, there's the analyzing of the system. It's starts from the actual profits to the frequency of the trade, % profitable, Profit Factor, Risk/Reward Ratio, expectancy, # of consecutive losses, and other basic system stats to the Sharpe Ratio, Optimals and etc. Then to the tradability of the system, whether the performance is duplicatable in real market situation. Trading System books and math books are nice to go into.

    There's too much to cover about trading system analysis. You really get into higher math stuff for these(calculus+) if you really want to be proficient in this matter. But if you're serious about becoming a full-time system trader, I would consider studying these things.