There are different forms of backtesting and a short paper provides the pros and cons of each, See "The Three Types of Backtests". This is a good summary of the types as well as the quality of simulations and backtests through several key issues. It provides a reasonable checklist of what an investor should do when conducting or reviewing a backtest.
This serves as a good complement to my paper “I Have Never Seen a Bad Backtest”: Modeling Reality in Quantitative Investing in The Journal of Investing.
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