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Choosing Between quantstrat and Custom R Backtests

Article Quant Q&A · Author: jeetkamal
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Summary

The document considers whether an R user with existing Monte Carlo backtest scripts should learn quantstrat or continue extending a custom framework. The response recommends treating quantstrat as another available tool, while emphasizing that the choice depends on what the researcher wants to improve. It raises three possible objectives: reducing overfitting risk, adding strategy complexity through layered signals, or simulating extreme economic conditions to examine strategy behavior.

No comparative results, implementation details, or benchmark of quantstrat against custom scripts are provided. The exchange therefore offers a way to clarify the decision rather than a general verdict about which approach is faster or more reliable. Its practical lesson is to define the backtesting need first, since those distinct aims may call for different methods and tools.

Key ideas

  • The choice between a backtesting package and custom scripts depends on the research objective.
  • Reducing overfitting risk is one possible goal to clarify before choosing a tool.
  • Layering multiple signals may call for different backtesting capabilities than a simpler strategy.
  • Simulating extreme economic conditions is another distinct backtesting objective.
  • The response gives no direct comparison or performance evidence for either approach.

Tags

BacktestingMachine learningRisk management
Full text
# Interpretation of holding lower beta assets leveraged to a beta of one and short high beta de-leveraged to a beta of one


# Interpretation of holding lower beta assets leveraged to a beta of one and short high beta de-leveraged to a beta of one












I was reading the famous paper "Betting against Beta" by Frazzini et al. They created BAB factor in which a portfolio is created by holding low beta assets, leveraged to a beta of one" and shorts the high beta assets, deleveraged to a beta of one. I understand the holding and short part, but not able to understand leveraged to a beta of one and deleveraged to a beta of one.

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