Way of the turtle

188
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Way of the Turtle

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than the MAR ratio; that is, it is less likely to change when minor
changes are made in the test.
Robust Sharpe Ratio
The robust Sharpe ratio is RAR% divided by the annualized stan-
dard deviation of the monthly return. This measure is less sensitive
to changes in the data set for the same reason that RAR% is less
sensitive than CAGR%, as was outlined above. Table 12-1 shows
how the robust measures are less sensitive to changes in the end
dates of the test.
Table 12-1
Normal versus Robust Measures
Test 01/96 
Test 02/96 
Normal Measures
to 06/06
to 04/06
%
CAGR% 51.7% 
54.4% 
5.2% 
MAR ratio 
1.31 
1.47 
12.2% 
Sharpe ratio 
1.39 
1.46 
5% 
Test 01/96 
Test 02/96 
Robust Measures
to 06/06
to 04/06 
%
RAR% 54.7% 
4.9% 
0.4% 
R-cubed 3.31 
3.63 
9.7% 
R-Sharpe
1.58 1.6 
1.3% 
Copyright 2006 Trading Blox, LLC. All rights reserved worldwide.
As is shown in Table 12-1, robust measures are less sensitive to
change than are the existing measures. The R-cubed measure is sen-
sitive to the addition or removal of large drawdowns but less sensitive
than is the MAR ratio. The impact of a single drawdown is diluted
On Solid Ground
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189

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by the averaging process used in the R-cubed measure. All the robust
measures were much less affected by these changes in data than were
their counterparts. If this test had not changed the maximum draw-
down, the R-cubed measure would have shown the same 0.4 percent
change that RAR% shows and the differences between the measures
would have been even more dramatic as the MAR would have
changed 5.2 percent (the same as the CAGR% that is its numerator)
and the R-cubed measure would have changed 0.4 percent. 
Another example of how robust measures hold up better can be
seen in the same performance comparison of our six basic systems
from Chapter 7. Recall how the performance dropped considerably
when we included the five months from July to November 2006.
Tables 12-2 and 12-3 show that robust measures held up much bet-
ter over the relatively adverse conditions of the last several months.
Table 12-2 shows the percentage changes in RAR% compared with
the percentage change in CAGR% for these systems.