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Re[2]: What Constitutes Acceptable System Performance?



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Hello Gabriel,

Tuesday, January 20, 2004, 7:30:42 AM, you wrote:

GG> Ross,

GG> A couple of comments/questions on all of this. I have heard that Sharp
GG> ratio is bad because it punishes upward volatility of your equity
GG> distribution. This MAR ratio sounds very interesting, but I would have a
GG> question about adjusting for changes in your account size; as the
GG> corresponding growth rate and percentage DD would all change. 2*max
GG> drawdown seems a little subjective. Just my 2 cents.

I think upward volatility is no better than downward
volatility.  Sharpe tends to punish volatility once the volatility becomes unusual.

However, I would say that Sharpe is unable to calibrate its normalized volatility of a
particular equity curve to one's own "realtime trading stomach", even though the eventual total profit is attractive.