|
PureBytes Links
Trading Reference Links
|
I don't have Kaufman's book, so its hard to respond objectively to his
example. Do the examples result in the same profit, or is one example more
profitable than the other, but both have the same SR?
-----Original Message-----
From: DC010225 [mailto:DC010225@xxxxxxxxxxxxx]
Sent: Sunday, December 30, 2007 8:06 AM
To: omega-list@xxxxxxxxxx
Subject: Re: "The Sharpe Engine" My 2008 project
The divisor in Sharpe Ratio (SR) is and always has been the sd of return
(not prices). Unfortunately, SR fails two of three criteria for good
performance measure as explained in Perry J. Kaufman in "The New Commodity
Trading Systems and Methods", look at pages 390 - 391 in 1987 edition.
Figure 18-1 demonstrates:
1. Figure 18-1(a): Consecutive small losses (bad System B) and alternative
small losses & wins (better System A) are the same according to SR
2. Figure 18-1(b): Large surges of profits (System A) and large losses
(System B) are the same according to SR.
In both cases System A is better than B and SR is not good in distinguishing
them. More details in Jack D. Schwager.
DC
----- Original Message -----
From: John Pretorius
To: omega-list@xxxxxxxxxx
Sent: Sunday, December 30, 2007 8:20 AM
Subject: RE: "The Sharpe Engine" My 2008 project
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
------------------------------------------------------------
JiWire Hotspot Helper eliminates the barriers to a safe and seamless Wi-Fi hotspot experience. Protect your privacy with powerful hotspot security, and ensure your favorite email program works regardless of where you connect.
Learn more and download your free trial today:
http://www.jiwire.com/hotspot-helper.htm
------------------------------------------------------------
|