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Omega Ratio by Keating and Shadwick
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Omega Ratio by Keating and Shadwick

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Omega Ratio by Keating and Shadwick

Paper:

https://faculty.fuqua.duke.edu/~charvey/Teaching/BA453_2006/Keating_An_introduction_to.pdf

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Is anyone using the Omega Ratio in their portfolios?

I am looking for measurements that work well with a portfolio with a large number of trades that are not easily influenced by outliers.

Mike

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R's PerformanceAnalytics package already includes Omega, for those who are using R.

 
Code
function (R, L = 0, method = c("simple", "interp", "binomial", 
    "blackscholes"), output = c("point", "full"), Rf = 0, ...) 
{
    method = method[1]
    output = output[1]
    if (is.vector(R)) {
        x = na.omit(R)
        switch(method, simple = {
            numerator = exp(-Rf) * mean(pmax(x - L, 0))
            denominator = exp(-Rf) * mean(pmax(L - x, 0))
            omega = numerator/denominator
        }, binomial = {
            warning("binomial method not yet implemented, using interp")
            method = "interp"
        }, blackscholes = {
            warning("blackscholes method not yet implemented, using interp")
            method = "interp"
        }, interp = {
            a = min(x)
            b = max(x)
            xcdf = Hmisc:::Ecdf.default(x, pl = FALSE)
            f <- approxfun(xcdf$x, xcdf$y, method = "linear", 
                ties = "ordered")
            if (output == "full") {
                omega = as.matrix(cumsum(1 - f(xcdf$x))/cumsum(f(xcdf$x)))
                names(omega) = xcdf$x
            } else {
                omegafull = cumsum(1 - f(xcdf$x))/cumsum(f(xcdf$x))
                g <- approxfun(xcdf$x, omegafull, method = "linear", 
                  ties = "ordered")
                omega = g(L)
            }
        })
        result = omega
        return(result)
    }
    else {
        if (length(Rf) > 1) 
            Rf <- mean(Rf)
        if (length(L) > 1) 
            L <- mean(L)
        R = checkData(R, method = "matrix", ... = ...)
        if (output == "full") 
            R = R[, 1, drop = FALSE]
        result = apply(R, 2, Omega, L = L, method = method, output = output, 
            Rf = Rf, ... = ...)
        if (output != "full") {
            dim(result) = c(1, NCOL(R))
            rownames(result) = paste("Omega (L = ", round(L * 
                100, 1), "%)", sep = "")
        }
        colnames(result) = colnames(R)
        return(result)
    }
}
Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

If you want
to support our community, become an Elite Member.

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