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Back Testing

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Financial Dictionary

back testing

Using historical data to determine the relationship of specific variables. For example, a researcher might use historical data to determine if changes in the money supply have influenced changes in stock prices. This relationship, if positive, can be used to develop an investment policy.

Wall Street Words: An A to Z Guide to Investment Terms by David L. Scott.
Copyright © 2003. Published by Houghton Mifflin.
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