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 amibroker@yahoogroups.com, 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 > > > > > > >