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If I have a simple long/short value strategy (say long stocks with high e/p and short stocks low e/p or any other parameter) rebalanced monthly, and a look back window of say 15 years. How do I calculate the statistical significance of my result?

thanks,

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Compare Sharpe , Sortino Ratios, yearly Profit,Max Drawdowns per year of your strategy to

1) buy and hold all of the stocks in your universe

2) few strategies (with different random seeds) which randomly buy /sells stocks in your universe with monthly re-balancing

If you want to go more mathematical and get p-values that your strategy's Sharpe Ratio if higher than buy and hold then compare buy and hold of index comprising your universe's stocks to your Sharpe ratio by using formulas (2-sided) from

http://www.datamineit.com/Sharpe%20Ratio%20Comparisons%20-%20J.D.%20Opdyke%20-%20preprint%20-%20Journal%20of%20Asset%20Management,%20Vol8(5),%202007.pdf

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  • $\begingroup$ thanks @alexprice that was useful. $\endgroup$
    – TRex
    Jan 4, 2020 at 10:52

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