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Hi Brian,
I cannot find your K-ratio file anymore...have you removed it?
paolo
--- In amibroker@xxxxxxxxxxxxxxx, "brian_z111" <brian_z111@xxx> wrote:
>
> Gerry,
>
> > 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.
>
> I have the latest version of his book and what you have posted is
> correct.
>
> I have uploaded a k-ratio.xls spreadsheet to the file section of this
> forum (there is an old version there under my old name - brian.z123 -
> not that one - the new one by brian_z111
>
> It is a dymamic file with a 20 datapoint example.
>
> Instructions are included but it is self-explanatory anyway.
>
> It should help sort it out a bit.
>
> brian_z
>
>
> --- In amibroker@xxxxxxxxxxxxxxx, "gerryjoz" <geraldj@> wrote:
> >
> > 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
> >
>
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