Backtesting not consistent
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When I am backtesting NSE 500 index and NSE 500 50 25 25 index, the results varying a lot. The constituents of both the indices are same then why this should happen?
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I back tested the strategies given in Prashant Shah sirs book but the results are not matching
Need guidance as I want to start my investment based on backtesting.
Thanks
RAK -
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@Arun Kokate said in Backtesting not consistent:
NSE 500 index and NSE 500 50 25 25 index
Both the indices are not identical. I am quoting following from following link of NSE:
https://www.niftyindices.com/indices/equity/broad-based-indices/nifty500-multicap-50-25-25-indexThe Nifty500 Multicap 50:25:25 index aims to measure the performance of portfolio of large, mid and small market capitalisation companies with target weights assigned to each size segment. The Nifty500 Multicap 50:25:25 index includes all companies that are part of Nifty 500 index. While in Nifty 500 index, the total weight of each size segment (Large, Mid and Small cap) is based on the total free float market capitalisation of all stocks falling within that size segment, in Nifty500 Multicap 50:25:25 index, the total weight of each of these three segments (Large, Mid and Small cap) is fixed at 50%, 25% and 25% respectively at every quarterly rebalance date. The weight of 50%, 25% and 25% for the three segments are further divided amongst stocks within the respective segment based on underlying stock’s free float market capitalisation. Weight of each size segment may be different from its respective capped level between two rebalance dates due to price drift of underlying stocks.
When you are using Nifty 500, it might possible that only large cap stocks are ranked as per the logic but in case of another index, stocks are picked up in the ratio of 50:25:25 as mentioned above.
So far the differences between backtesting results referred in the book and done by you, @Definedge team can explain it.