Is there a good backtesting package in R?

Question

My model exports a vector that have for each day b-buy s-sell or h- hold it's look like this:

sig [1] b b s s b b b s s b s b s s b s b s s s s b b s s b b b b b b s b b b b b b b

I want to backtest that it will buy or sell all the equity in the portfolio at the end of each day and for hold will do nothing. what is the best way to backtest in R or other method this strategy?

Thanks

Answer 1

1. In R, there are basically two packages to backtest your strategy: SIT and quantstrat. I personally prefer the former because it's much faster and more transparent in terms of how your positions are managed. In addition, SIT gives your more flexibility in how your trading signals are formed.

2. If you have a very basic strategy, like long/short/stay on the sidelines, perhaps the best approach to quickly test your strategy is to have 2 vectors like @Rime advised above: one for returns and the other for your positions (either 1, -1, or 0), and multiply them to get returns for your positions when you are in the market (either short or long). Two pieces of advice if I may:

   • Shift your action (buy or sell) one period forward relative to the signal.

   • Short position. Think carefully how you would accumulate profits over multiple periods. If you happen to short a stock which had lost 10% each day for 3 days in a row (i.e. from 100 to 90 on first day, to 81 on second, and to 72.9 on the third day) that wouldn't make you wealthier by 33.1% (1.1^3 -1), as if it were for positive returns on the long side. Your return would rather be 27.1% which you would not get by simply multiplying returns and positions... (more at this blogpost at SIT)