AdjustedSharpeRatio: Adjusted Sharpe ratio of the return distribution

In PerformanceAnalytics: Econometric Tools for Performance and Risk Analysis

Description

Adjusted Sharpe ratio was introduced by Pezier and White (2006) to adjusts for skewness and kurtosis by incorporating a penalty factor for negative skewness and excess kurtosis.

Usage

AdjustedSharpeRatio(R, Rf = 0, ...)

Arguments

R	an xts, vector, matrix, data frame, timeSeries or zoo object of asset returns
Rf	the risk free rate
...	any other passthru parameters

Details

Adjusted Sharpe ratio = SR x [1 + (S/6) x SR - ((K-3) / 24) x SR^2]

where SR is the sharpe ratio with data annualized, S is the skewness and K is the kurtosis

Author(s)

Matthieu Lestel, Brian G. Peterson

References

Carl Bacon, Practical portfolio performance measurement and attribution, second edition 2008 p.99

Pezier, Jaques and White, Anthony. 2006. The Relative Merits of Investable Hedge Fund Indices and of Funds of Hedge Funds in Optimal Passive Portfolios. http://econpapers.repec.org/paper/rdgicmadp/icma-dp2006-10.htm

See Also

SharpeRatio.annualized

Examples

data(portfolio_bacon)
print(AdjustedSharpeRatio(portfolio_bacon[,1])) #expected 0.7591435

data(managers)
print(AdjustedSharpeRatio(managers['1996']))

Example output

Loading required package: xts
Loading required package: zoo

Attaching package: 'zoo'

The following objects are masked from 'package:base':

    as.Date, as.Date.numeric


Attaching package: 'PerformanceAnalytics'

The following object is masked from 'package:graphics':

    legend

[1] 0.8084219
                                          HAM1     HAM2     HAM3     HAM4 HAM5
Adjusted Sharpe ratio (Risk free = 0) 2.040073 10.85643 1.110574 1.857069   NA
                                      HAM6 EDHEC LS EQ SP500 TR  US 10Y TR
Adjusted Sharpe ratio (Risk free = 0)   NA          NA 1.938178 0.03978634
                                       US 3m TR
Adjusted Sharpe ratio (Risk free = 0) -606.3258

PerformanceAnalytics documentation built on Feb. 6, 2020, 5:11 p.m.