Jensen’s Alpha Spreadsheet

I decided to spend some free time to prepare an Excel spreadsheet so I could calculate Jensen's alpha for my trading performance.  The basis of my work is the spreadsheet found here. Jensen's alpha was developed by Michael Jensen and originally presented in a 1967...

Coding Lars Kestner’s K-Ratio in Excel

In 1996, Lars Kestner wrote an article titled "Measuring System Performance" for Stocks and Commodities magazine that introduced a new ratio to compare the performance of various trading strategies.  This new ratio, which he named the k-ratio, was focused on...

All About Expectancy Part Two

Below are the back tested results for two of the mean reversion strategies that I use: As both the expectancy and normalized expectancy values are very similar, one might expect similar portfolio growth from the two systems.  Alas, it isn't so. How can System 1 with...

All About Expectancy

If you perform an internet search on how to calculate expectancy as it relates to trading systems, you will most often see the following: Expectancy = (probability of win x average win) + (probability of loss x average loss) The average win and average loss can be...