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Grant & Gerry,
I have added another worksheet to the K-ratio.xls file in the file
section of this group.
Instructions are included - you can change the inputs to 'stress
test' the K-ratio with different types of equity curves.
I am confident the file allows us to form a reasonable view on the
strengths and weaknesses of the K, despite the fact that it is not
mathematically sophisticated.
I find it a reliable metric.
I don't see any evidence that it is prone to time dependence.
I do find it a conservative metric - if the equity curve has above
ave variance the K forces us to find high growth systems.
The corresponding weakness is that if the variance is extremely low
it can 'pass' very low growth systems.
All in all a quite safe metric to use providing its benign weaknesses
are allowed for (I say benign because if a low growth/low variance
system is incorrectly selected the end result won't be a total
disaster).
Anyway - the file will let you decide for yourself.
brian_z
--- In amibroker@xxxxxxxxxxxxxxx, Grant Noble <gruntus@xxx> wrote:
>
> > The K-ratio isn't worth the space it takes up: RRR is simpler.
>
> care to elaborate?
>
> gerryjoz wrote:
> > In an earlier post, expectancy was associated with profit factor.
> > It is more closely related to payoff ratio.
> > In Van Tharp's book, 2nd edition, "Trade your way...", page 204 et
> > seq, he calculates
> > Expectancy = average profit/ # trades
> > divided by average loss.
> > Payoff ratio is average profit/average loss,
> > so
> > Expectancy = payoff ratio/# trades.
> > --which can give very low numbers, and makes the concept rather
> > dubious if you are using it as an absolute value for comparing
systems
> > with different numbers of trades. It might be better to use
trades per
> > annum.
> > To be fair Van Tharp only gives that way of calculating
expectancy as
> > a default if the risk of a trade isn't able to be calculated
taking
> > into account a pre-determined proportion of equity. For that, you
need
> > to read the whole chapter.
> > Personally i find CAR/MDD, RRR more relevant, along with the raw
> > Payoff ratio.
> >
> > The K-ratio isn't worth the space it takes up: RRR is simpler.
> >
> > regards
> > Gerry
> >
> >
> >
> >
> >
> > ------------------------------------
> >
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> >
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> > SUPPORT {at} amibroker.com
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> >
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> >
> >
> >
> >
>
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