4.2.3. Back-Testing

Table 7 illustrates the results of the back-testing from 2007S4 to 2018S3 for the trading system. With the strategy, we can achieve positive annual return in SMB, CMA, CRMHL, and AMLH for 15.43%, 3.23%, 29.13%, and 8.4% respectively. To some extent, the result proved the practicability of the seven-factor model, especially for the factor CRMHL in terms of trading strategy. Consequently, with alternative trading strategies which can predict the factor fluctuation more precisely, we can witness a greater margin of improvement.


**Table 7.** Back-testing float return from 2007S4 to 2018S3 and expected annual return for factors.
