Dear All

i am having a problem with White's Reality Check: Assume we apply it to
trading rule backtesting and we wish to know if a rule significantly
outperforms other rules. We generate the bootstrapped samples from the
detrended returns (i.e. randomly sampled daily return  - mean daily return
of that rule ) for each rule and then build the sampling distribution by
choosing the highest among a set of 'k' rules. We repeat this 'N' times to
build a sampling distribution. But then to calculate the p-value of the null
hypothesis, we read the p value as the fraction of observations that exceed
the initial mean return of the rule! Isn't that inconsistent because we are
comparing a non-detrended value with detrended returns? or am i missing
something?

Subramanian S

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