RE: "The Sharpe Engine" My 2008 project

["John Pretorius" <johnpretorius@xxxxxxxxxxxxx>]

Dennis

You are quite correct.

Many years ago I was introduced to the ratio by someone who defined it
incorrectly and criticised it as I have just done. I have assumed all
these years that the divisor was the sd of price rather than return. I
then promptly closed my mind to it.

Another fondly held prejudice bites the dust.

John R Pretorius 

-----Original Message-----
From: DH [mailto:catapult@xxxxxxxxxxxxxxxxxx] 
Sent: 29 December 2007 09:54 PM
To: Omega List
Subject: Re: "The Sharpe Engine" My 2008 project

Following up on my last post, here's a pseudo-Sharpe-type calc that
shows downside volatility is penalized more than upside volatility.
There are two series of identical trades making either 1 or 2 points
except the first series has a 10 point winner and the second has a 10
point loser. The first series has a pseudo-Sharpe score of nearly 3x the
second one.

1	1	trade profit or loss
2	2	
1	1	
2	2	
1	1	
2	2	
1	1	
2	2	
1	1	
2	2	
10	-10	
2	2	
1	1	
2	2	
1	1	
2	2	
1	1	
2	2	
1	1	
2	2	
		
39	19	net profit
1.96	2.63	std dev
19.90	7.24	pseudo-sharpe ratio

-- 
  Dennis