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DC wrote:
>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.
Another example: System A returns 0.001% greater than the risk-free
interest rate with zero-to-few drawdowns, and almost-perfect
consistency. System B returns 60% per year on your account with
modest 10% drawdowns. System A will have the higher SR due to
near-zero standard deviation, but I'd still prefer system B.
-A
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