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Forums>StrategyQuant>General Discussion>How to understand the netprofit(IS/OOS ratio)?

  • #237862 |
    Customer
    268 Posts

    Hello,

    I’m a little confused about this setup.

     

    According to the literal meaning, I guess the net profit(IS/OOS ratio) is net profit in IS / net profit in OOS.

    IF the net profit in IS is 1000$, net profit in OOS is 400$, so the net profit(is/oos ratio) is 250%.

    But in the ebook, it’s been described below,

    If strategy makes $6000 on whole In Sample period, and $4000 on Out of sample period, then its Net
    Profit (IS/OOS Ratio) will be 66.6% (because $4000 is 66.6% from $6000).

    So the IS/OOS ratio means that performance in OSS / performance in IS?

    If I want that the performance in OSS is 60% better than in IS at least, I should set “dismiss when IS/OSS ratio is below 60%”?

     

    #237863
    Customer
    430 Posts

    This ratio only makes sense if the IS and OOS has the same length. Otherwise i would have to be adapted to the difference in length as well which it probably is in the eBook.

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