The common starting point for alpha discovery and risk analysis is the backtesting of historical company financials using a research database. Whether internally constructed or licensed, research databases can be distinguished by two primary formats – Point in Time and Non-Point in Time.

This paper focuses on the major practical differences between Point in Time (PIT) and Non-Point in Time (Non PIT) data for both backtesting and historical research. PIT data is defined by its ability to answer two questions: “When was the information known?” and “What information was known at the time?”.

Our research finds that PIT backtests produce significantly different results than lagged Non-PIT data using common factors. In addition, when single factors are combined into multifactor tests these differences in results may become magnified.