Regime-Conditional Distributional Comparison of Trading Strategies: A GAMLSS/ZAGA Framework Applied to the S&P 500

Abstract

Conventional comparisons of algorithmic trading strategies reduce each performance metric to a single number over the full backtest horizon, thereby discarding information about how performance varies with market conditions. This paper proposes a distributional framework that addresses this shortcoming. A walk-forward backtest of 146 out-of-sample folds on the S&P 500 (2002--2025) is used to compute the Adjusted Information Ratio ($IR^{\ast}$) for a polynomial Support Vector Machine strategy (SVMP) and a buy-and-hold benchmark (BH) in each fold. The resulting $IR^{\ast}$ sequences are modelled jointly via a Generalised Additive Model for Location, Scale and Shape (GAMLSS) with a Zero-Adjusted Gamma (ZAGA) response, with distributional parameters conditioned on market regime covariates: realised volatility and cumulative market momentum. Strategy comparison is conducted through (i) regime-specific differences in expected $IR^{\ast}$ ($\Delta E$) and its variance ($\Delta Var$), derived analytically from the fitted ZAGA parameters, and (ii) parametric bootstrap tests of three null hypotheses concerning $E(IR^{\ast})$, $Var(IR^{\ast})$, and their ratio, evaluated at six representative market regimes. The results demonstrate that the dominance relationship between SVMP and BH is conditional on market regime. The proposed GAMLSS/ZAGA framework constitutes a methodologically rigorous and practically interpretable alternative to conventional strategy evaluation.