Hey, why did my Cake rank change?

Nov 1st, 2008 | Filed under: Analytics and Metrics, Cake News, Tech Updates

Hi folks, this is Brian, Product guy for Cake. You may or may not have noticed that your Cake rank changed recently. It was an intentional change on our part, not a bug in the system.

The Cake ranking system takes into account a couple of factors:

1. Your Sharpe ratio, or your risk adjusted performance. What it tells you is “was the reward worth the amount of risk you took in order to get it?” The formal definition of Sharpe ratio is here: http://www.investopedia.com/terms/s/sharperatio.asp

2. Your investing tenure. Members who have been doing well over a long period of time get extra credit.

The major change to our ranking system is that we’ve dialed up the importance of your Sharpe ratio and tenure in determining your rank. The old formula took into account your network size, ie. the number of people who follow your trades. We’ve de-emphasized that…in fact, we don’t take it into consideration at all anymore.

Why make the change? First and foremost, it gives you a much more objective way to evaluate another member. Now when you’re looking at a highly-ranked member, you know that they’ve performed well, relative to their risk taken, for a good amount of time. Secondly, we made the change to keep up with the times. In these rollercoaster economic times, we’ve found that members are hunkering down more and focusing on themselves, and not as much on others, so we want our product to reflect that. Hence, you no longer get bonus points for having lots of connections to others. Likewise, you don’t get held back because you’re not connected to others. As always, feedback is welcome and greatly appreciated! Thanks again.