I am an economic last year student trying to figure out how to backtest my model.
It consist on several requirements imposed to the stocks before buying them and a very simple exit strategy.
I first impose the condition to the stocks of showing improvement in the following parameters:
- Return on Equity
- Gross margin
- Being above its 200 daily arithmetic mean
- Achieve at least three increasing minimums
Each company receives one point for each requirement accomplished, ranging from zero to six.
My idea is to make a regression between the returns of the stocks and the punctuation obtained in the test to see if there is a positive correlation.
I think that it may be very simple but since I just started in the quant finance it would be great to have some feedback and recommendations about how to improve my backtesting.