Supply chain flashcard on Backtesting. It is the process of assessing the accuracy of a forecasting method using existing historical data. WE CAN’T DO BACKTESTING FOR THIS NEW PRODUCT FORECAST – IT HAS NO SALES HISTORY! 2: It is used to estimate the expected future accuracy of a forecasting method. SO THE ACTUAL ACCURACY MIGHT CHANGE – IS THAT WHAT YOUR BACKTESTING MEANS? Despite being good practice backtesting has limitations and may have limited use for new product launches and promotions. An image of the flashcard contains Robin Hood-like character proudly displaying a target with an apple nailed to the dead center. The apple has an arrow through it, giving the illusion of a perfect shot. He holds a bow in his other hand. The image serves as a metaphor for the overfitting problem in backtesting, where a model may appear to perform perfectly but only because it has been overly tailored to the historical data.

Artist: Marina Besfamilnaya

Learn more in the entry Backtesting of the Lokad knowledgebase.