CAPM.jensenAlpha: Jensen's alpha of the return distribution

In JFE: Tools and GUI for Analyzing Time Series Data of Just Finance and Econometrics

Jensen's alpha of the return distribution

Description

The Jensen's alpha is the intercept of the regression equation in the Capital Asset Pricing Model and is in effect the exess return adjusted for systematic risk.

Usage

CAPM.jensenAlpha(Ra, Rb, Rf = 0)

Arguments

Ra	an xts, vector, matrix, data frame, timeSeries or zoo object of asset returns
Rb	return vector of the benchmark asset
Rf	risk free rate, in same period as your returns

Details

\alpha = r_p - r_f - \beta_p * (b - r_f)

where r_f is the risk free rate, \beta_r is the regression beta, r_p is the portfolio return and b is the benchmark return

Author(s)

Ho Tsung-wu <[e-mail]>, College of Management, National Taiwan Normal University.

References

Carl Bacon, Practical portfolio performance measurement and attribution, second edition 2008 p.72
See also package PerformanceAnalytics.

Examples

  data(assetReturns)
	assetReturns=assetReturns["2011::2018"] #short sample for fast example
	Ra=assetReturns[, -29]
	Rb=assetReturns[,29] #DJI

CAPM.jensenAlpha(Ra, Rb)

JFE documentation built on Aug. 28, 2023, 9:06 a.m.