False Discovery Rate Control - Quant Trader Interview Question
Difficulty: Hard
Category: Regression Analysis
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Topics: hypothesis-testing, statistics, false-discovery-rate, multiple-comparisons
Problem Description
You are backtesting 100 different algorithmic trading strategies on historical data. You decide to test each strategy for statistical significance at a significance level of $α = 0.05$. Assume that, in reality, none of the 100 strategies are actually profitable; their apparent profitability is purely due to random chance.
On average, how many strategies would you expect to incorrectly show up as statistically significant? Which multiple hypothesis testing correction procedure directly contr
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