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Finding Definitions for Backtest Performance and Risk Metrics

Article Quant Q&A · Author: Richi Wa
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Summary

The document asks where to find definitions for a broad range of performance and risk measures calculated from backtest returns, including familiar and less common risk-adjusted ratios. It points readers toward software documentation as a practical reference: Python’s QuantStats and the R packages PerformanceAnalytics and AssetAllocation provide collections of such metrics.

The replies suggest that package documentation may define measures or direct readers to original research, while finance textbooks generally cover the main metrics. No single comprehensive reference covering every measure is identified, and the recommendations are pointers rather than a comparison of metric definitions or implementations. Researchers should therefore check how each package calculates a statistic and consult source papers when methodological details matter.

Key ideas

  • Backtest returns can be summarized with many performance and risk measures.
  • QuantStats and PerformanceAnalytics offer collections of metrics for return analysis.
  • Package documentation may provide definitions or references to original research.
  • The discussion does not identify one reference that covers every metric.

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BacktestingRisk managementStatistics
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# Is there an encyclopedia of peformance/risk measures for backtests of strategies?


# Is there an encyclopedia of peformance/risk measures for backtests of strategies?












Analysing a backtest of a strategy i.e., a series of returns of a defined period we can consider various metrics such as the Sharpe-ratio or more exotic ones like the Omega-ratio. What I was wondering: is there an encyclopedia that covers (really many) of these ratios? E.g., the R package AssetAllocation by Alex Rubesam offers many risk measures for a given backtest, and I would like to be able to provide a definition of as many of them as possible.

## Answer by SachaTheBrave (score 3)

https://quant.stackexchange.com/a/76437

You can use quantstats in Python. https://github.com/ranaroussi/quantstats

## Answer by rubetron (score 1)

https://quant.stackexchange.com/a/78300

In my AssetAllocation package I made use of the PerformanceAnalytics package, which covers many of these metrics. Quantstats in Python offfers similar functionality. Maybe the documentation of these packages may offer some guidance or refer to some of the original papers. I'm not sure about a book that covers all of them. But typical finance textbooks will cover the main ones. For example, the book below has a section towards the end on risk-adjusted performance metrics.

https://www.wiley.com/en-us/Market+Risk+Analysis%2C+Volume+I%2C+Quantitative+Methods+in+Finance-p-9780470998007

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

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