Tomasz, I think this statement:
> Should be 1.0 or more. is no longer correct for the new version and should be corrected in the help file. Greetings, Thomas > ----- Original Message ----- > From: "Ron Rowland" <[EMAIL PROTECTED]> > To: <[email protected]> > Sent: Friday, July 27, 2007 7:06 PM > Subject: [amibroker] Re: K-Ratio Implementation (revisited) > > > Thanks Thomas, but no, I don't believe that post does not answer my > > question. The post below explains the the difference between K-Ratio > > (1996) and K-Ratio(2003). However, it does not explain the > > Backtester results. > > > > K-Ratio(1996) = LinRegSlope / (StdErr * sqrt(n)) > > K-Ratio(2003) = LinRegSlope / (StdErr * n) > > K-Ratio(Ami) = LinRegSlope / StdErr * sqrt(n) / sqrt(12) > > > > The sqrt(12) function is typically used to convert a monthly StdDev > > (or StdErr) to an annualized one. I do not understand its purpose > > here. > > > > Alternatively, there could be additional errors in mys undertanding > > of these functions: > > > > LinRegSlope returns the slope for 1 period. Since the slope is > > linear, it can be annualized by multiplying a daily slope by 252 > > market days in a year. Multiplying by n will provide total increase > > over the entire backtest. > > > > StdErr returns the standard error function (the 1-period average of > > the entire range). Since it is essentially a 1-period standard > > deviation, to annualize this value you should multiply by sqrt(252). > > > > It seems to me that LRS / StdErr = K-Ratio for one day. > > > > To annualize this, it should be multiplied by 252/ sqrt(252). > > Of course, any number multiplied by its sqrt = its sqrt, to the > > annualized version can be simplified to > > > > LRS/ StdErr * sqrt(252). > > > > If for some reason, you do not want an annualized version that can be > > compared for various time frames, you can create the cumulative > > version by replacing 252 with n (the number of observations). This > > suggests that sqrt(252) should be in numerator instead of n being in > > the denominator. > > > > My thinking and/or assumptions must be off somewhere, but I cannot > > determine where. > > > > > > > > --- In [email protected], Thomas Ludwig <[EMAIL PROTECTED]> > > > > wrote: > >> TJ once explained that in a posting in this list: > >> > Hello, > >> > > >> > By the way it is NOT surprising that you are getting lower values > >> >than before. > >> > > >> > In his book Mr. Lars Kestner writes: > >> > > >> > ' The K-ratio is a unitless measure of performance that can be > >> >compared across markets and time periods. [ - - - ] Traders should > >> > search for strategies yielding K-ratios greater than +0.50. > >> >Together, the Sharpe ratio and K-ratio are the most important > >> > measures when evaluating trading strategy performance. Note: When > >> >I created the K-ratio in 1996, I thought I had created a > >> > robust measure to evaluate performance. In mid-2000, trader Bob > >> >Fuchs brought a small error to my attention regarding the > >> > scaling of the K-ratio. He was correct in his critique and I have > >> >corrected the error in this text. Publications prior to 2002 will > >> > show a different formula for the K-ratio. The updated formula in > >> >this book is correct.' > >> > > >> > Previous AB versions contained old K-ratio formulation [of 1996] > >> >and newest one contains > >> > new formulation [from Kestners book of 2003]. > >> > > >> > The difference between those two formulations [i.e. 'trader Bob > >> >Fuchs brought a small error to my attention regarding the > >> > scaling of the K-ratio. ' ] > >> > is just the factor denominator that is now [NumberOfObservations] > >> >instead of SQRT[ NumberOfObservation] > >> > > >> > Since [NumberOfObservations]/SQRT[NumberOfObservations] = SQRT > >> >[NumberOfObservations] > >> > it makes it obvious that new K-ratio figures will be SQRT > >> >[NumberOfObservations] times smaller than previous. > >> > > >> > The relationship between new and old version can be written as: > >> > > >> > KRatio[ NEW2003 ] = KRatio[ OLD1996 ]/SQRT[NumberOfObservations] > >> > > >> > You can correspond with Mr. Kestner why 'new' is better than 'old' > >> >but do not discuss this with me, because I did not invent it. > >> > >> I guess that answers your question. > >> > >> Greetings, Thomas > >> > >> > I made two posts on this subject a couple of weeks ago, but it > > > > seems > > > >> > those posts have disappeared. > >> > > >> > Anyway. I am now able to duplicate the AmiBroker 4.96 beta CBT > > > > results > > > >> > for K-Ratio. My implmentation follows and appears to match the > >> > AmiBroker results for backtest periods lasting from 2 months to > > > > 17+ > > > >> > years. > >> > > >> > Eq = Foreign("~~~EQUITY", "C"); // Assign Close of Backtest > > > > Equity = Eq > > > >> > n = Barcount -1; // Number of periods > >> > > >> > // K-Ratio - only valid for non-compounding systems > >> > EqLRS = LinRegSlope(Eq, n+1); // Linear Reg Slope of entire (n+1) > > > > range > > > >> > EqSE = StdErr(Eq, n+1);// Std Err of entire (n+1) range > >> > EqKR = EqLRS/EqSE; // K-Ratio (unitless measure) > >> > EqKRAmi = EqKR*sqrt(n+1)/sqrt(12);// AmiBroker 4.96 > > > > implementation > > > >> > My question is: Why does it require a divide by sqrt(12) to work? > >> > > >> > > >> > > >> > > >> > Please note that this group is for discussion between users only. > >> > > >> > To get support from AmiBroker please send an e-mail directly to > >> > SUPPORT {at} amibroker.com > >> > > >> > For NEW RELEASE ANNOUNCEMENTS and other news always check DEVLOG: > >> > http://www.amibroker.com/devlog/ > >> > > >> > For other support material please check also: > >> > http://www.amibroker.com/support.html > >> > > >> > Yahoo! Groups Links > > > > Please note that this group is for discussion between users only. > > > > To get support from AmiBroker please send an e-mail directly to > > SUPPORT {at} amibroker.com > > > > For NEW RELEASE ANNOUNCEMENTS and other news always check DEVLOG: > > http://www.amibroker.com/devlog/ > > > > For other support material please check also: > > http://www.amibroker.com/support.html > > > > Yahoo! Groups Links > > Please note that this group is for discussion between users only. > > To get support from AmiBroker please send an e-mail directly to > SUPPORT {at} amibroker.com > > For NEW RELEASE ANNOUNCEMENTS and other news always check DEVLOG: > http://www.amibroker.com/devlog/ > > For other support material please check also: > http://www.amibroker.com/support.html > > Yahoo! Groups Links > > >
