by Lasse Heje Pedersen, Tobias J. Moskowitz, Yao Hua Ooi
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Start with the foundations, then use the reading focus to connect the paper to further study.
Use only information available at the simulated decision time.
Separate model selection from the final evaluation.
Check whether a relationship can be estimated consistently over time.
Read the fitted relationship and its residuals.
Reconcile signals, executions, positions and P&L.
Include the costs that can erase a paper strategy.
Study long-run relationships without confusing them with correlation.
Choose a reproducible strategy, specify the trading rule, and test what remains after costs and estimation uncertainty.
Practise timing and accounting before extending to multi-asset momentum.
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