Amarjit, Prof. Yollin has addressed your poor etiquette.
I'll address the substantive portion of your email. On 09/11/2014 01:45 AM, amarjit chandhial wrote:
In Slide 56 charts.PerformanceSummary(returns, geometric=FALSE, wealth.index=TRUE) Comparing Slides 48 & 57 faber curves do not agree. Slide 48 has a value of approx.10.63, Slide 57 has a value of approx.3.77 (wealth+2.77). It cannot be both-ways regarding returns from b.strategy, it's either geometric or arithmetic chaining? So hypothetically speaking my boss says to me you have a strategy that makes Net profit = 2,770,644, on an initial equity = 1,000,000 (slides 30-42), yet you say to me it makes cumulative return of 10.63 (slides 47-50), how does that work?
I think you answered your own question. These are cash returns, without compounding.
So applying geometric compounding as though every dollar earned were somehow available for instant reinvestment (even though that is clearly not what the fixed order sizing of the strategy did) is clearly erroneous.
It seems that analysts need to know when to use geometric versus arithmetic chaining, so this is likely a typo in the slide code. The responsibility for understanding that data continues to lie with the reader.
Brian -- Brian G. Peterson http://braverock.com/brian/ Ph: 773-459-4973 IM: bgpbraverock _______________________________________________ [email protected] mailing list https://stat.ethz.ch/mailman/listinfo/r-sig-finance -- Subscriber-posting only. If you want to post, subscribe first. -- Also note that this is not the r-help list where general R questions should go.
