ERRATA for Knowledge rather than Hope - A Book for Retail Investors and Mathematical Finance Students

25.01.2015 Clarified an ambiguous statement about the maximum drawdown, p.9: (thanks to Joshua Ulrich)
In the Quiz/A4 I write: "Note that the experienced traders usually consider the maximum drawdown,
which does not depend on the order of returns and is equal to -20% in both cases". 

Of course I meant that it does not depend on the order of returns in THIS example.
I just wanted to emphasize that the loss of 20% is still the loss of 20% and for an experienced  
trader it does not matter whether it was made at the beginning or at the end.

But of course in general the maximum drawdown does depend on the order of returns, e.g.
a sequence of returns [0.05, 0.05, -0.03, -0.03] is worse (in the sense of the maximum DD) than [0.05, -0.03, 0.05, -0.03].
However there is no difference between [0.05, -0.03, 0.05, -0.03] and [-0.03, 0.05, -0.03, 0.05] in the sense of the maximum DD. 

29.11.2014 Found an error in R-script 4_2.r: 

if((MA[d] > closePrices[d]) && (signal == "inCash")) 
  which should be
if((closePrices[d] > MA[d]) && (signal == "inCash"))
if(((MA[d] < closePrices[d]) || (d == N_DAYS)) && (signal == "inStock"))
  which should be
if(((closePrices[d] < MA[d]) || (d == N_DAYS)) && (signal == "inStock"))

After fixing this bug one can see that the MA200-Strategy did work pretty well for the German market.
However, a fixed version still does not work for the US Market (have a look at 4_2a_dj30.r in R-code)

06.02.2016 Found an error on the left-hand side of the Formula 1-A11-1 on p.13
The exponent should be tn rather than t/n, i.e. $(1+r/n)^{nt} = exp(rt)$ when $n ->\infty$
(thanks to Jean Francis Michon)

back to the main page