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Gary Fritz wrote:
>want a minimum of drawdowns, and if possible I want it to pump out
>profits on a fairly steady and consistent basis.
>
>And the Sharpe ratio is just about the best tool to measure that kind
>of behavior.
By the way, those of you interested in the Sharpe Ratio might want to
look into the "Sharper Ratio" at
http://www.medianline.com/sharperatioexample.xls
The author says about it:
The Sharpe ratio, created by William Sharpe, is a widely used
measure of trading performance. The ratio is constructed of
trading returns divided my the standard deviation (a measure
of risk) of returns. Trouble is, the ratio penalizes upside
variablity (in the direction of profits) as well as downside
volatility.
The Sharper ratio overscomes this problem by using, as the
divisor in the ratio, the square root of the sum of the square of
periodic (in this case, monthly) drawdowns for the period being
analyzed. In addition to not penalizing profitable periods, the
Sharper ratio penalizes deep extended periods of drawdown more
than shallow drawdowns, more closely capturing the investors
feelings about drawdown periods.
--
,|___ Alex Matulich -- alex@xxxxxxxxxxxxxx
// +__> Director of Research and Development
// \
//___) Unicorn Research Corporation -- http://unicorn.us.com
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