Validation method

Deflated Sharpe Ratio

DSR

The Deflated Sharpe Ratio is reported as a label: high, medium, or low.

What this check looks at

After exits have been compared, the Deflated Sharpe Ratio is written as one of three words. The label is high, medium, or low. High is the stronger label. Medium sits between. Low is the weaker label.

Why a label is enough

Many tries can leave one Sharpe that looks strong. The label records how that Sharpe sits once those tries are taken into account. The published result is the word, not a cutoff.

How Alphavo runs it

The label is attached when exits are compared. It is high, medium, or low. It is not a reject line. It is not a p-value. It is not a 0.95 cutoff. A Candidate Strategy is not Alpha.

How to read the result

Read the word on the report. A high label is the stronger of the three, and a low label is the weaker. The label does not assign 0 stars, 1 star, 2 stars, or 3 stars. Those stars appear when a strategy is shown.

Limits

• The label is not a reject line, so a low label is not itself a decision to drop the candidate.
• The label is not a p-value, and it is not a 0.95 cutoff.