Aligning Return Labels with Strategy Holding Periods

Summary

This brief discussion asks whether a strategy’s return calculation horizon should match its holding period. The response says the answer depends on the trading logic, but that the two are generally kept consistent so a backtest represents the intended trade. A separate comment explains that users define the return calculation for their own purposes, including as a training label.

The central lesson is that a return horizon is part of the strategy or model specification: if it differs from the planned holding period, the measured outcome may not reflect the intended trade duration. The page does not explain how to handle overlapping positions, transaction costs, or label construction in detail, and it provides no empirical comparison. Researchers should therefore treat the general recommendation as context dependent and align the horizon with the target use.

Key ideas

• The return calculation horizon should reflect the strategy’s trading logic.
• Matching the return horizon to the holding period generally makes backtests more interpretable.
• Return calculations can also serve as user-defined training labels.
• The discussion does not specify how to resolve more complex horizon or position overlap issues.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.