True vs. Snooped Sharpe Ratios

Data snooping bias is pervasive in published research and quantitative investment strategies. Should investors resign themselves to the consequence that investment managers/funds offer products picked mostly on past luck? In his May 2018 presentation package entitled “How the Sharpe Ratio Died, and Came Back to Life”, Marcos Lopez de Prado introduces an approach to Sharpe ratio estimation via backtesting that would enable academia, regulators and investors to distinguish between strategies that probably work and those that probably do not. Based on the evolution of Sharpe ratio estimation approaches, he concludes that: (more…)