Performance
How often an outcome happens with no rule or signal at all — for example, how often any two-year window of the S&P 500 ended higher. A rule only shows an edge if it beats its base rate.
In a market that rises most of the time, almost any "buy and hold for a while" rule has a high win count. Comparing against the base rate shows how much of the record is the rule and how much is just the market.
Also called: base rates.
Taught in
We Tested It: The Election-Year RuleStrategy Playbook"Buy two years before the election, sell on election day" — checked on S&P 500 data back to 1950: the moved dates, the 2008 crash, the base rate, and the part of the edge that may be real.
Related terms