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>Really, the sharpe value for the second system should be calculated only for
>those times where money is put at risk. Is there any reason not to look at
>it in that way?
You are correct.
In this case you need to "stop time" and not count the days when
you are not using the money (the money is used for other things).
I have a version of my Sharpe Ratio measurement system that allows
this. One of the input parameters is "StopTime":
StopTime: TRUE - Does not include days when the MarketPosition = 0
(not long or short) in the calculation. In effect, it
bases the calculation on days when the system is in the
market. This is useful when unused cash balances are
used for other trades during periods when this system
is flat.
I will post it sometime after I have a chance to document it better.
Bob Fulks
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