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

In PerformanceAnalytics: Econometric Tools for Performance and Risk Analysis

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
...	any other passthru parameters

Details

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

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

Author(s)

Matthieu Lestel

References

Carl Bacon, Practical portfolio performance measurement and attribution, second edition 2008 p.72

Examples

data(portfolio_bacon)
print(SFM.jensenAlpha(portfolio_bacon[,1], portfolio_bacon[,2])) #expected -0.014

data(managers)
print(SFM.jensenAlpha(managers['1996',1], managers['1996',8]))
print(SFM.jensenAlpha(managers['1996',1:5], managers['1996',8]))

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