compPortfo: Compares two vectors (portfolios) using momentVote,...

Description Usage Arguments Value Note Author(s) References See Also Examples

View source: R/compPortfo.R

Description

Given two vectors of portfolio returns this function summarizes their ranks based on moments, deciles and exact measures of stochastic dominance. as explained in Vinod (2021). This algorithm has model selection applications.

Usage

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compPortfo(xa, xb)

Arguments

xa

Data on returns for portfolio A in the form of a T by 1 vector

xb

Data on returns for portfolio B in the form of a T by 1 vector

Value

Returns three numbers which represent signs based differences in ranks (rank=1 for most desirable) measured by [rank(xa)-rank(xb)] using momentVote, decileVote, and exactSdMtx which are weighted averages of four moments, nine deciles and exact measures of stochastic dominance (from ECDFs of four orders, SD1 to SD4) respectively.

Note

There are model-selection applications where two models A and B are compared and one wants to choose the model smaller absolute value of residuals. This function when applied for model-selection will have he inputs xa and xb as absolute residuals. We can compare the entire probability distributions of absolute residuals by moments, deciles or SD1 to SD4. Of course, care must be taken to choose xa or xb depending on which model has smaller absolute residuals. This choice is the exact opposite of portfolio choice application where larger return is more desirable. silentPair2() and siPair2Blk call this function for model selection application.

Author(s)

Prof. H. D. Vinod, Economics Dept., Fordham University, NY

References

Vinod, H. D.", "Hands-On Intermediate Econometrics Using R" (2008) World Scientific Publishers: Hackensack, NJ. (Chapter 4) https://www.worldscientific.com/worldscibooks/10.1142/6895

Vinod, Hrishikesh D., R Package GeneralCorr Functions for Portfolio Choice (November 11, 2021). Available at SSRN: https://ssrn.com/abstract=3961683

See Also

exactSdMtx

momentVote

decileVote

Examples

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set.seed(30)
xa=sample(20:30)#generally lower returns
xb=sample(32:40)# higher returns in xb
gp = compPortfo(xa, xb)#all Av(sdi) positive means xb dominates
##output (1,1,1) means xb dominates xa. xb are larger by consruction

generalCorr documentation built on Jan. 4, 2022, 1:08 a.m.