Risk & Validation
Risk and validation research focuses on methods for assessing the robustness of quantitative findings and managing the risks associated with systematic strategies, including overfitting detection, drawdown analysis, and stress testing.
Why It Matters
Without rigorous validation, it is impossible to distinguish between genuine market insights and statistical artifacts. Risk and validation research provides the frameworks needed to assess the reliability and robustness of quantitative research findings.
Research Questions
- How can we detect and prevent overfitting in quantitative research?
- What stress testing methods best reveal strategy vulnerabilities?
- How should risk metrics be calculated for realistic performance assessment?
- What role does regime change play in strategy degradation?
Methods
Experiments
Ongoing research comparing different validation frameworks and their effectiveness at detecting overfit strategies. Also studying the relationship between validation rigor and out-of-sample performance.
Validation
Validation methodologies are themselves validated through simulation studies using known data-generating processes, allowing us to measure the detection rate and false positive rate of each approach.