Model Evaluation - Excess Returns and Hit Rate

As covered previously, you can find Excess Return and Hit Rate in Accuracy to see your model’s performance. 

To measure how well your signals are doing:

• Long Portfolios - You’d want to see high, positive excess return and hit rate >50% in your top bucket (Q1, D1, or V1 depending on your breakdown). 

Short Portfolio - You’d want to see low, negative excess return and hit rate <50% in your bottom bucket (Q5, D10, or V20).