Financial back-testing is when the strategies of the past are used to see what would happen, hypothetically, when projected into the future.
Wall Street financial models often use such data mining; Information for investing strategies of the past. They’re collected and tested on a “what if’ basis.
All this is based on many assumptions that the mathematical models are supposed to predict.
As I’ve noted before, I have made a unique mini-career of looking at well over 1,600 investment strategies used by investors over the years. I have investigated advantages and disadvantages of each.
And I can tell you there are some worthwhile concepts as well as gibberish in all. But no panacea. Most of the data mining is therefore useless, except for their marketing of investment management services. (See the Earl J Weinreb NewsHole® comments.)
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