how to calculate annualized performance

Discussion in 'Strategy Development' started by NYSEtradinglog, Aug 27, 2003.

  1. Hi I am searching for a way to calculate average annualized performance WITHOUT compound interest.

    Lets say I have a system or what ever that makes in 4 years 400%. So the big question is what is my average yearly performance ?

    Any ideas?

    Thanks
     
  2. NinjaTrader_Dierk

    NinjaTrader_Dierk ET Sponsor

    Hmmm. I probably did miss the point, but since you not (!!) compounding, why not simply take 100% per year ?

    Dierk
     
  3. Dierk the problem is I only have the 400% and this 400% are including compound interest.

    Example
    http://iasg.pertrac2000.com/SnapshotPT.asp?ID=67

    Campel is up 1800 since starded in 1983. So 1800 / 20 are 90% ;)

    The Annualized Return is not 90% it is 15.25% as you can see in the information box at the right hand side.

    So is there a way to calculate this number down from 1800% ????

    D
     
  4. NinjaTrader_Dierk

    NinjaTrader_Dierk ET Sponsor

    Ahh, now I got your. Sorry for the delay :)

    Try this:
    You have ~ 20 years.

    (1 + p(t)) = (1 + p(1))*(1 + p(2))*(1 + p(3))* .... (1 + p(20))

    Where p(t) is the total profit and p(1...20) are annual profits. Since you assume all annual profits are equal (averaged), the following is true:

    1 + p(avg) = power(1 + p(t), 1/20)

    or

    p(avg) = power(1 + p(t), 1/20) - 1

    and here:

    power(1 + 18, 1/20) - 1 = 0.1586 = 15.86%

    The divergence to 15.25% may be result of the unprecise period (not exactely 20 years).

    Hope this helps

    Dierk
     
  5. thanks a lot Dierk