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Strategies & Market Trends : Shorting stocks: Broken stocks - Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mortwald who wrote (2303)	5/4/1999 11:59:00 AM
From: Q.	Read Replies (1) \| Respond to of 2506

Thanks, Mort. Can you tell us what your backtest results were?

To: mortwald who wrote (2303)	5/4/1999 11:12:00 PM
From: Q.	Read Replies (2) \| Respond to of 2506

Thanks, Mort. I wouldn't have thought of including the criterion: "Stock sells at least 90% of 50 day MA. Eliminates stocks which have just been through a severe tumble. (This did improve results significantly)" That was an imaginative thing to try. re. the stocks that didn't give you a closing price -- that is probably an example of 'survivor bias'. Companies that merged, become delisted, or just plain fail don't show up after a while. By excluding them in backtesting, you get an excessively positive return compared to what you would really get if you are long, and vice versa for short. Survivor bias is an inherent problem in backtesting. Some people think that it might negate the claims made that investing long in small caps has historically generated returns superior to investing in big caps. That's because bad small caps are more likely to fail or be acquired.