Model Level: For each
model SYFIR Backtesting will develop a universe of stocks based on the universe
selection criteria for each month during the time period of the backtest.
For each stock, SYFIR Backtesting gathers each of the selected data elements,
applies the appropriate weights, derives a score and normalizes the scores.
In the event that a data element does not exist for a given security, a
backup data element previously selected by the user will be used in its
place. In the event that neither the primary data element nor backup data
element is available for a given stock for a given time period, a default
value selected by the user will be used. A rank is then assigned to each
stock. This ranked list of stocks for each period will normalize and merged
to create a finished backtest.
SYFIR Backtestings Dynamic Universe Selection and Dynamic Multiple Factor Selection provide a new list of stock's and new factor selection and associated raw data for each month throughout the backtest. This functionality adds a new dimension of customization for managers and analysts performing backtests.
Model Merge: Leveraging SYFIR Backtesting's multiple model capabilities portfolio managers or analysts can create complex and flexible backtests piece by piece. Once this stage of the process is completed, the system will merge these multiple models to arrive at a finished backtest. In the merging process, the system will analyze all models assigned to the backtest and systematically stack rank the stock in the backtest according to their rank in their respective models. The completed rankings will reflect each stocks relative position to other stocks in the overall backtest based on that stocks rank in the model from which it was taken.
The figure below illustrates the merging the two models created the earlier example into a combined backtest. Each of the stocks from the two models are systematically arranged into a backtest stock list based on their rank in their respective models. The entire list is then reranked and backtest ranks are assigned.
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