(Re)Introducing the K-Ratio

10 Pages Posted: 11 Mar 2013

Date Written: March 3, 2013


I introduced the K-ratio in 1996 as a reward to risk measurement to compliment the popular Sharpe ratio. The K-ratio is calculated by fitting a linear trend series to cumulative returns and estimating the slope and variability of slope. Over the years there have been comments on adjustments factors needed to account for varying number of return observations and return periodicity. In this paper I show that the correct adjustments to the raw K-ratio include dividing by the number of return observations and multiplying by the square root of expected observations in a calendar year.

Suggested Citation

Kestner, Lars N., (Re)Introducing the K-Ratio (March 3, 2013). Available at SSRN: https://ssrn.com/abstract=2230949 or http://dx.doi.org/10.2139/ssrn.2230949

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