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I have corrected the gross oversight where I failed to apply a simple
test for the effect that ordering has on the K-ratio.
It doesn't stand up too well, but the same thing would apply to all
metrics that use linear regression I guess.
Due to the semi-random nature of the markets, ordering of any
magnitude isn't likely in the real world so perhaps it isn't a
concern.
I have uploaded K-ratio_v2.xls to the file section of this group.
It has an additional worksheet for reordering - it doesn't have any
instructions for that sheet - a knowledge of Excel is assumed:
- open worksheet K-ratio long example re-ordered!
- F9 to force a recalc
- note the final equity and K-ratio metrics
- copy column E and paste special as values into column F
- use the toolbar icon to sort ascending and then descending and
watch the above metrics change (sort on row F only - do not include
the data columns next to row F).
Note that equity outcome is independent of the GrowthFactor
(Geomean/PowerFactor) order but that the K-ratio value changes with
re-ordering.
(the files aren't permanent - later I will take them down - maybe
they will find a new home).
Hope that helps add some clarity to evaluation metric discussion,
particularly K-ratio.
brian_z
--- In amibroker@xxxxxxxxxxxxxxx, "brian_z111" <brian_z111@xxx> wrote:
>
> 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@> 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
> > >
> > >
> > >
> > >
> > >
> > > ------------------------------------
> > >
> > > 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
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> > >
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> > >
> > >
> > >
> > >
> >
>
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