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Hi Paolo,
Housekeeping ... best ask my wife about my performance record :-)
http://zboard.wordpress.com/downloads/
Scroll down to Miscellaneous Files 2.3 >> K-ratio.xls
--- In amibroker@xxxxxxxxxxxxxxx, "Paolo Cavatore" <pcavatore@xxx> wrote:
>
> Hi Brian,
>
> I cannot find your K-ratio file anymore...have you removed it?
>
> paolo
>
>
>
> --- In amibroker@xxxxxxxxxxxxxxx, "brian_z111" <brian_z111@> 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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