Daepak
What a KOSPI-relative backtest actually measures
A backtest answers one narrow question: would this set of rules have beaten KOSPI, after costs, over the sample you chose? Nothing more.
KOSPI is a market-cap weighted index of Korea's main board. It is quoted in Korean won. Most global readers see it through an ETF or a USD proxy, which adds a currency layer the index itself does not have.
Korea's market is concentrated. Semiconductors dominate the index. On 14 September 2026, KOSPI fell more than 3% and lost the 7,000 level, with Samsung Electronics and SK hynix down 3–5%. A basket holding both is largely a chip bet wearing a diversified label.
That's the first trap.
Step 1 — Write the rules down first
Decide the universe, the weighting, the rebalance date, and the exit rule before you download anything. Then never touch them.
Write them as sentences a stranger could follow. "Top 20 by market cap, equal weight, rebalanced quarterly, no single name above 10%." That's a rule set.
If you change a rule after seeing results, you are fitting noise. The result stops being evidence.
Step 2 — Choose a data spine you can audit
Price data is the easy part. The hard part is knowing what the company actually was on the date you bought it.
Korean issuers file with DART. That is the electronic disclosure system run by the Financial Supervisory Service. Filings there give the raw numbers behind a ticker. Our walkthrough of DART filings covers where those figures come from and how they differ from vendor-adjusted data.
Check three things: ticker changes, share splits, and fiscal-year shifts. Each one breaks a naive price series.
Step 3 — Separate the stock leg from the won leg
KOSPI returns come in won. Your returns come in your home currency. Those are different numbers.
A Korean equity can rise 10% in won and deliver less in dollars if the won weakens. Backtest both legs. Report the won return, the currency return, and the product.
This matters more than beginners expect. Foreign flow moves the won and the index together. The overnight link between KOSPI and US markets runs through the currency, which we covered in the won FX guide.
Ignore FX and the ratio lies.
Step 4 — Survivorship bias is the quiet killer
Most free Korean stock lists show companies that exist today. Delisted names vanish. That flatters any strategy that held small caps.
Rebuild the universe at each rebalance date. Include names that later merged or delisted.
Korean markets also halt trading. A halted stock is not a zero, and it is not a tradeable price. Decide your rule up front and apply it consistently.
Step 5 — Costs, taxes, and the boring part
Add commission, the bid-ask spread, and the FX conversion cost. Korean small caps can be thin