Backtesting is the process by which the smallcase investment objective is calculated over a period of time to provide investors a better idea of the portfolio performance across different time periods.
Backtesting is important for any investing strategy, to see if the investment objective remains valid & leads to the desired results in various market conditions.
There are two very important aspects of backtesting:
- Producing the backtest results without any bias to check how slightly different strategies perform in different periods
- Keeping the criteria same after launch to ensure the strategy is working as intended
Every smallcase page shows historical returns, how the smallcase performed before the launch date in the backtesting period and also after the launch date when it was live.