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At 3:55 PM -0400 9/23/98, Phil Lane wrote:
>Just to try and finish what I started, the System Stats page is now
>working. BTW does anyone have the formulas handy for Sharpe ratio and K
>ratio?
Sharpe Ratio Calculation
Sample the value of the trading account every so often - assume monthly.
(Assuming all profits are allowed to accumulate in the account.) The value
you want is not just the profits but the total of the profits and the
original margin balance in the account.
Assume each monthly value is in column B of a spreadsheet.
In column C, calculate the percent change in the value each month
C2 = 100 * (B2 - B1) / B1 (and copy down the column)
Now at the bottom of column C calculate:
The average value of the figures in column C (Call this "A")
The standard deviation of the values in column C (Call this "S")
The Sharpe Ratio is equal to
Sharpe = (12 * A) / (SQRT(12) * S)
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(This assumes monthly values. For weekly values use:
Sharpe = (52 * A) / (SQRT(52) * S), etc.)
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(This also assumes you are getting interest on the margin balance in your
account.)
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There are subtle errors in this. You actually should use logarithmic
increases; the value will depend somewhat on the original margin balance in
the account, etc., but this calculation is simpler and will be very close.
A good system should have a value above about 2.0 and a value over 3 is super.
Bob Fulks
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