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# How do you assess the track record of a strategy?

25-02-2015 | Visión

How do you assess the track record of a strategy in order to ensure the best possible future returns? The solution to this problem was discovered by former Guinness employee, William Sealy Gosset. He needed a cheap way to test the quality of barley for brewing beer and devised the t-value to tackle the problem of drawing conclusions based on a small sample size using a formula known as the t-statistic.

The formula can be applied to many industries, including finance, because investors often face a similar problem of not having an unlimited sample size. The t-value can be used to test the statistical significance of excess returns - the returns of a strategy relative to an index. The standard deviation of these returns is the tracking error (TE). Once the t-value is calculated, it can be compared to the t-statistic for T-1 degrees of freedom and a 95% significance level. The outcome of this can be determined by the standard t-tables.
If you apply this formula to Robeco Core Developed Markets* (Institutional Global Enhanced Index fund), which has an average annual outperformance since inception relative to the MSCI World of 1.17%, a TE of 1.09%, and IR of 1.08 and a >10-year track record, the t-value is 1.09*√10.1= 3.46. This is statistically significant; because the critical t-statistic for 95% significance is 1.86.

* The value of your investments may fluctuate. Past results are no guarantee of future performance.

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### Información importante

Los Fondos Robeco Capital Growth no han sido inscritos conforme a la Ley de sociedades de inversión de Estados Unidos (United States Investment Company Act) de 1940, en su versión en vigor, ni conforme a la Ley de valores de Estados Unidos (United States Securities Act) de 1933, en su versión en vigor. Ninguna de las acciones puede ser ofrecida o vendida, directa o indirectamente, en los Estados Unidos ni a ninguna Persona estadounidense en el sentido de la Regulation S promulgada en virtud de la Ley de Valores de 1933, en su versión en vigor (en lo sucesivo, la “Ley de Valores”)). Asimismo, Robeco Institutional Asset Management B.V. (Robeco) no presta servicios de asesoramiento de inversión, ni da a entender que puede ofrecer este tipo de servicios, en los Estados Unidos ni a ninguna Persona estadounidense (en el sentido de la Regulation S promulgada en virtud de la Ley de Valores).