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TJ once explained that in a posting in this list:
> Hello,
> By the way it is NOT surprising that you are getting lower values
>than before.
> 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.'
> Previous AB versions contained old K-ratio formulation [of 1996]
>and newest one contains
> 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]
> You can correspond with Mr. Kestner why 'new' is better than 'old'
>but do not discuss this with me, because I did not invent it.
I guess that answers your question.
Greetings, Thomas
> I made two posts on this subject a couple of weeks ago, but it seems
> those posts have disappeared.
>
> Anyway. I am now able to duplicate the AmiBroker 4.96 beta CBT results
> for K-Ratio. My implmentation follows and appears to match the
> AmiBroker results for backtest periods lasting from 2 months to 17+
> years.
>
> Eq = Foreign("~~~EQUITY", "C"); // Assign Close of Backtest Equity = Eq
> n = Barcount -1; // Number of periods
>
> // K-Ratio - only valid for non-compounding systems
> EqLRS = LinRegSlope(Eq, n+1); // Linear Reg Slope of entire (n+1) range
> EqSE = StdErr(Eq, n+1);// Std Err of entire (n+1) range
> EqKR = EqLRS/EqSE; // K-Ratio (unitless measure)
> EqKRAmi = EqKR*sqrt(n+1)/sqrt(12);// AmiBroker 4.96 implementation
>
> My question is: Why does it require a divide by sqrt(12) to work?
>
>
>
>
> Please note that this group is for discussion between users only.
>
> To get support from AmiBroker please send an e-mail directly to
> SUPPORT {at} amibroker.com
>
> For NEW RELEASE ANNOUNCEMENTS and other news always check DEVLOG:
> http://www.amibroker.com/devlog/
>
> For other support material please check also:
> http://www.amibroker.com/support.html
>
> Yahoo! Groups Links
>
>
>
Please note that this group is for discussion between users only.
To get support from AmiBroker please send an e-mail directly to
SUPPORT {at} amibroker.com
For NEW RELEASE ANNOUNCEMENTS and other news always check DEVLOG:
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For other support material please check also:
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