example3_4.m

clear; % make sure previously defined variables are erased.

[num, txt]=xlsread('IGE'); % read a spreadsheet named "IGE.xls" into MATLAB. 

tday=txt(2:end, 1); % the first column (starting from the second row) contains the trading days in format mm/dd/yyyy.

tday=datestr(datenum(tday, 'mm/dd/yyyy'), 'yyyymmdd'); % convert the format into yyyymmdd.

tday=str2double(cellstr(tday)); % convert the date strings first into cell arrays and then into numeric format.

cls=num(:, end); % the last column contains the adjusted close prices.

[tday sortIndex]=sort(tday, 'ascend'); % sort tday into ascending order.

cls=cls(sortIndex); % sort cls into ascending order of dates.

dailyret=(cls(2:end)-cls(1:end-1))./cls(1:end-1); % daily returns

excessRet=dailyret - 0.04/252; % excess daily returns = strategy returns - financing cost, assuming risk-free rate of 4% per annum and 252 trading days in a year

sharpeRatio=sqrt(252)*mean(excessRet)/std(excessRet) % the output should be 0.7618

%%%%%%%%%%%%%%%%% Second part of example starts here %%%%%%%%%%%%%%%%%

[num, txt]=xlsread('SPY'); % read a spreadsheet named "SPY.xls" into MATLAB. 

tday=txt(2:end, 1); % the first column (starting from the second row) contains the trading days in format mm/dd/yyyy.

tday=datestr(datenum(tday, 'mm/dd/yyyy'), 'yyyymmdd'); % convert the format into yyyymmdd.

tday=str2double(cellstr(tday)); % convert the date strings first into cell arrays and then into numeric format.

cls=num(:, end); % the last column is the adjusted close prices.

[tday sortIndex]=sort(tday, 'ascend'); % sort tday into ascending order.

cls=cls(sortIndex); % sort cls into ascending order of dates.

dailyretSPY=(cls(2:end)-cls(1:end-1))./cls(1:end-1); % daily returns

netRet=(dailyret - dailyretSPY)/2; % net daily returns (divide by 2 because we now have twice as much capital.)

sharpeRatio=sqrt(252)*mean(netRet)/std(netRet) % the output should be 0.7837

%%%%%%%%%%%%%%%%%% third part of example starts here %%%%%%%%%%%%%%%%%%
% calculation of maximum drawdown and maximum drawdown duration

cumret=cumprod(1+netRet)-1; % cumulative compounded returns

plot(cumret);

[maxDrawdown maxDrawdownDuration]=calculateMaxDD(cumret);

maxDrawdown % maximum drawdown. Output should be 0.1053

maxDrawdownDuration % maximum drawdown duration. Output should be 497