%0 Journal Article %A Marcos López de Prado %T The Future of Empirical Finance %D 2015 %R 10.3905/jpm.2015.41.4.140 %J The Journal of Portfolio Management %P 140-144 %V 41 %N 4 %X Empirical finance is in crisis. The profession’s most important discovery tool is historical simulation, and yet most backtests and time series analyses published in journals are flawed. The problem is well known to professional organizations of statisticians and mathematicians, who have publicly criticized the misuse of mathematical tools among finance researchers. In this article, the author points to three problems and proposes four practical solutions. In an attempt to overcome the challenges posed by multiple testing and selection biaes, the author emphasizes the need to move from an individual-centric to a community-driven research paradigm. Low retraction rates can be corrected through technologies that derive “peer p-values.” Stronger theoretical foundations and closer ties with financial firms would help prevent false discoveries.TOPICS: Portfolio theory, simulations, portfolio management/multi-asset allocation %U https://jpm.pm-research.com/content/iijpormgmt/41/4/140.full.pdf