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Hello,
Discussed already in detail in the past.
There is "old" and "new" K-ratio because Mr. Kestners (the author of K-ratio)
changed his mind in the meantime. The "new" is SQRT(NumberOfBars) smaller than
"old" one.
=== Quote from previous posts ===
In his book Mr. Lars Kestner writes:
" The K-ratio is a unitless measure of performance that can be compared across markets and time periods. [ - - - ] Traders should
search for strategies yielding K-ratios greater than +0.50. Together, the Sharpe ratio and K-ratio are the most important
measures when evaluating trading strategy performance. Note: When I created the K-ratio in 1996, I thought I had created a
robust measure to evaluate performance. In mid-2000, trader Bob Fuchs brought a small error to my attention regarding the
scaling of the K-ratio. He was correct in his critique and I have corrected the error in this text. Publications prior to 2002 will
show a different formula for the K-ratio. The updated formula in this book is correct."
Old AB versions (before 4.56.1) contained old K-ratio formulation (of 1996) and newest ones contain
new formulation (from Kestners book of 2003).
The difference between those two formulations (i.e. "trader Bob Fuchs brought a small error to my attention regarding the
scaling of the K-ratio. " )
is just the factor denominator that is now (NumberOfObservations) instead of SQRT( NumberOfObservation)
Since (NumberOfObservations)/SQRT(NumberOfObservations) = SQRT(NumberOfObservations)
it makes it obvious that new K-ratio figures will be SQRT(NumberOfObservations) times smaller than previous.
The relationship between new and old version can be written as:
KRatio( NEW2003 ) = KRatio( OLD1996 )/SQRT(NumberOfObservations)
Best regards,
Tomasz Janeczko
amibroker.com
----- Original Message -----
From: "Clement Chin" <clement@xxxxxxxxxx>
To: <amibroker@xxxxxxxxxxxxxxx>
Sent: Monday, January 31, 2005 3:38 PM
Subject: [amibroker] K-Ratio in Report
>
> Below is the explanation of K-Ratio from User's Guide. I cannot get a figure
> of 1.0 or more. My figures are around 0.15, 0.17... Please comment on this
> K-factor. Is it important?
>
>
> K-Ratio - Detects inconsistency in returns. Should be 1.0 or more. The
> higher K ratio is the more consistent return you may expect from the system.
> Linear regression slope of equity line multiplied by square root of sum of
> squared deviations of bar number divided by standard error of equity line
> multiplied by square root of number of bars. More information: Stocks &
> Commodities V14:3 (115-118): Measuring System Performance by Lars N. Kestner
>
>
>
>
>
>
> Check AmiBroker web page at:
> http://www.amibroker.com/
>
> Check group FAQ at: http://groups.yahoo.com/group/amibroker/files/groupfaq.html
> Yahoo! Groups Links
>
>
>
>
>
>
>
>
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