|
PureBytes Links
Trading Reference Links
|
Hi Louis,
> Hi,
>
> I've read somewhere that optimizing (or walk-forwarding) using
> measures as k-ratio, RRR or max drawdown can lead to curve-fitting
> and is not a good strategy. Do you agree?
No! It's not a good strategy to perform only an IS test and to gloat
over a seemingly beautiful equity curve but to completely refrain from
OOS testing. IMHO, K-ratio is a good measure, and I understand that
it's one of Howard's favourite ones, too.
Greetings,
Thomas
>
> What do you think is the best optimizing strategy?
>
> Thanks,
>
> Louis
>
> 2008/4/13, gerryjoz <geraldj@xxxxxxxxxx>:
> > Grant,
> > in your post you asked me to elaborate on why i thought the K-ratio
> > was a waste of space and RRR was simpler/better. What i have found
> > is that k-ratio is generally lower the higher the exposure for the
> > same or similar trading systems in back test. If you want a high
> > k-ratio, according to the AB calc, don't buy or sell!
> > Here is a contrived (curve-fit) example (run on real data) over a
> > few years
> > CAR 33%
> > Profit factor 7
> > CAR/MDD 2.8
> > Max Sys DD % 11.5%
> > RRR 2.15
> > K-ratio .096
> > exposure 49%
> > #trades 170
> >
> > the K-ratio definitio in AB help is
> > "
> > 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
> > "
> > personally i prefer measures which are more easily comprehended.
> > This one isn't, even tho 40 years ago i did do maths & stats at
> > uni. In any case, back in May 2004 Tomasz changed the calc...
> > ======>
> >
> > K-ratio calculation changed. following the change made by its
> > creator, Mr. Lars Kestner.
> >
> > Quoting from the book "Quantitative Trading Strategies" from 2003
> > by Lars Kestner:
> >
> > [ - - - ]
> > " 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."
> >
> > Mr Lars Kestner has corrected his formula based on this critique:
> > K-ratio = slope / ( sterr * per )
> >
> > slope: Linear regression slope of equity line
> > sterr: Standard error of slope
> > per: Number of periods in the performance test
> >
> > Special thanks to Jeremy Berkovits who brought that to my
> > attention.
> >
> > <======
> > There was quite a bit of discussion at the time.
> > I understand RRR intuitively, and when i look at the other ratios i
> > can see why one is higher or lower (with a bit of checking).
> >
> > Is it possible that there was a typo in the K-ratio correction?
> > Perhaps Mr Kestner has made another change?
> > I don't have his books or articles, i just gave up on the k-ratio
> > because i didn't think it was telling me anything useful.
> >
> > I would be interested if you or anyone else have run some examples
> > where K-ratio is high and exposure is high, and what are the other
> > backtest numbers.
> >
> > regards
> > Gerry
------------------------------------
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
<*> To visit your group on the web, go to:
http://groups.yahoo.com/group/amibroker/
<*> Your email settings:
Individual Email | Traditional
<*> To change settings online go to:
http://groups.yahoo.com/group/amibroker/join
(Yahoo! ID required)
<*> To change settings via email:
mailto:amibroker-digest@xxxxxxxxxxxxxxx
mailto:amibroker-fullfeatured@xxxxxxxxxxxxxxx
<*> To unsubscribe from this group, send an email to:
amibroker-unsubscribe@xxxxxxxxxxxxxxx
<*> Your use of Yahoo! Groups is subject to:
http://docs.yahoo.com/info/terms/
|