Re: [amibroker] Re: Annualized Standard Deviation?

 

Greetings --

Regarding
"What I want it for is to create Perry Kaufman's Information Ratio which is CAR/Annualized SD. The resulting values show how likely the system is to be robust. Anything above 3.0 indicates an overfit system."

-------------------

CAR/SD has dimensions similar to those of Sharpe ratio.  I am skeptical that it has a strong relationship to being overfit.  A ratio of mean (such as CAR is) to standard deviation is a z-score.  High values suggest data points that are relatively rare.  That could result from a model that accurately identifies the profitable pattern -- just as we hoped it would -- which would be precisely the wrong reason for rejecting a system.

Poor OOS results could come from either a model that was overfit or a change in the data between the IS and OOS periods.

The best method of determining whether a model has been overfit to the data is strict (one time use) out-of-sample test.  Which is what live trading will be, which is a good reason for following sound modeling, simulation, and data science procedures. 

Best regards,
Howard

On Sun, Feb 14, 2016 at 5:52 AM, sladbrook@hotmail.com [amibroker] <amibroker@yahoogroups.com> wrote:
 

Thanks Gregg


That got it!


I've made the same bloody mistake in the past. I'm going to have to stick a note up on the wall to remind myself!


Thanks again


CK

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Posted by: Howard B <howardbandy@gmail.com>
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