Have you actually tried backtesting with 1,000,000 initial equity vs. 100,000? I think that you will see that there is no difference at all in the metrics.
As described on the same page from which you found the formula, AmiBroker uses *exposure* as the initial_value, where exposure is summed bar by bar from position sizes. http://www.amibroker.com/guide/w_report.html Mike --- In [email protected], Ted Byers <r.ted.by...@...> wrote: > > Thanks. That helped a lot. > > However, I am not especially happy with the following: > > System test report window > > correctly_annualized_perc_return = 100% * ( (final_value/initial_value) ^ ( > 365 / days_in_test ) - 1 ) > > where x^y means rising x to the power of y > > > The problem I find lays in knowing precisely what initial_value is supposed > to be. Yes, the formula is correct, and makes sense, if the initial value > is fully utilized in the investment (such as the initial and final value of > a house one has purchased). However, in the system I am working on, at no > point does the total value of all open positions exceed $100,000, and yet I > have been instructed to set, as a default for backtesting purposes, initial > cash at 1,000,000 (the trader we're working with doesn't want to deal with > any limits posed by the available cash). But that means I can arbitrarily > improve the rate of return by a factor of ten if I use an initial value of > 100,000 or arbitrarily make it worse by using an initial value of > 2,000,000. Obviously, I can't use an initial value less than 100,000 or the > trades the system recommends would not be possible, but apart from that > constraint, that I can arbitrarily alter initial value without affecting > total return seems to make this figure just so much meaningless BS. At no > time, when using this code, is position size computed from the available > cash. > > How, then, can I define things in such a way that ensures that the rate of > return actually has a meaningful value? So far, it seems I can only compute > a meaningful value for the rate of return for a specific trade (where the > initial value is obviously the cost of buying the shares, for a long > position, or the value received from the sale of shares, for a short > position), but not for a collection of trades distributed over a period of > several years. Is there a standard way for handling this? One that is > demonstrably valid? > > > Thanks > > > Ted > > > On Mon, Feb 8, 2010 at 4:11 PM, reefbreak_sd <reefbreak...@...> wrote: > > > > > > > In AB, click on HELP -> SEARCH > > type in "BackTester Report" in the search window > > Under the "Select Topic" that comes back, click on "System Test Report > > Window" and you will see a definition of each term. Many of these are > > industry standard metrics of performance. > > > > You can go to www.investopedia.com and type in for example "risk adjusted > > return" and get a more detailed explaination of most of the report items. > > > > Reef > > > > > > --- In [email protected] <amibroker%40yahoogroups.com>, Ted Byers > > <r.ted.byers@> wrote: > > > > > > Hi All, > > > > > > > > > I am digging into how AmiBroker computes the various statistics it > > reports > > > on a given back test. > > > > > > For example, I see the following reported: > > > > > > Exposure % > > > Net Risk Adjusted Return % > > > Annual Return % > > > Risk Adjusted Return % > > > > > > Where will I find the details of exactly how AmiBroker computes these > > from a > > > given suite of trades? Now, I know what a risk adjusted return is, but in > > > my previous work, it is based on 100% of the cash being invested, and it > > > carries a specific definition of "risk". In the system I am working with > > > now, it is rare for 100% of the available cash to be invested, and a > > really > > > really long lived trade lasts only a couple weeks (though 9 out of 10 > > trades > > > were profitable in my last back test using my own C++ code - which in my > > > view was quite bad - average position size of about 50,000 and total > > profit > > > over 2 years being about 10,000). It seems rather meaningless to report > > an > > > annual rate of return if one is in the market for less than a month. > > > > > > In this "system", the position size is not a function of the total amount > > of > > > cash available; so if these rates are defined relative to the total > > amount > > > of cash available, I can arbitrarily change these rates by increasing or > > > decreasing the amount of cash available, within limits. I am afraid my > > > understanding of these ideas is derived from the perspective of an > > investor > > > (where one buys a stock, and looks at returns based on the combination of > > > dividends and long term change in share value, adjusted for splits, &c.). > > > If I can see how AmiBroker computes these stats for a given backtest, I > > hope > > > to understand these from the perspective of a trader. > > > > > > So where will I find the documentation of how AmiBroker computes these > > back > > > test statistics? > > > > > > Thanks > > > > > > Ted > > > > > > > > > > > > > -- > R.E.(Ted) Byers, Ph.D.,Ed.D. > t...@... > CTO > Merchant Services Corp. > 350 Harry Walker Parkway North, Suite 8 > Newmarket, Ontario > L3Y 8L3 >
