The Zephyr K-Ratio quantifies two things: the appreciation of wealth and the consistency of that wealth creation. 

Like many statistical ratios, the K-Ratio is a return-vs.-risk tradeoff metric, with the numerator being an expression of return and the denominator a measure of risk.  The numerator, the measure of return, is the slope of a best-fit regression line superimposed over a cumulative return series.  The steeper the slope, the larger the number, the faster the rate of appreciation of wealth. 

The Zephyr K-Ratio by Thomas Becker, Ph.D.

Wed, 2010-10-13

In 1996, Lars Kestner introduced the K-Ratio as a complement to the Sharpe Ratio. With Version 8.1, Zephyr Associates makes the K-Ratio available to StyleADVISOR users. This article explains the use, the meaning, and the exact mathematical definition of the ratio.


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