DaviesLaker: calculates total attribution effects using Davies and Laker...

In R-Finance/PortfolioAttribution: Performance attribution tools used for identifying sources of portfolio return and risk.

Description

Calculates total attribution effects over multiple periods using Davies and Laker linking method. Used internally by the Attribution function. Arithmetic attribution effects do not naturally link over time. This function uses Davies and Laker linking method to compute total attribution effects. Arithmetic excess returns are decomposed as follows:

Rp - Rb = Allocation + Selection + Interaction

Allocation = ∏^{T}_{t=1}(1+bs_{t})-∏^{T}_{t=1}(1+R_{bt})

Selection = ∏^{T}_{t=1}(1+rs_{t})-∏^{T}_{t=1}(1+R_{bt})

Interaction = ∏^{T}_{t=1}(1+R_{pt})-∏^{T}_{t=1}(1+rs_{t})- ∏^{T}_{t=1}(1+bs_{t})+∏^{T}_{t=1}(1+R_{bt})

Rpi - portfolio returns at period i, Rbi - benchmark returns at period i, rsi - selection notional fund returns at period i, bsi - allocation notional fund returns at period i, T - number of periods

Usage

  DaviesLaker(Rp, wp, Rb, wb)

Arguments

Rp	xts of portfolio returns
wp	xts of portfolio weights
Rb	xts of benchmark returns
wb	xts of benchmark weights

Value

This function returns the data.frame with original attribution effects and total attribution effects over multiple periods

Author(s)

Andrii Babii

References

Bacon, C. Practical Portfolio Performance Measurement and Attribution. Wiley. 2004. p. 201-204
Davies, O. and Laker, D. (2001) Multiple-period performance attribution using the Brinson model. Journal of Performance Measurement. Fall. p. 12-22

See Also

Attribution
Menchero
Grap
Carino
Attribution.geometric
Frongello

Examples

data(attrib)
DaviesLaker(Rp = attrib.returns[, 1:10], wp = attrib.weights[1, ], Rb = attrib.returns[, 11:20], wb = attrib.weights[2, ])

R-Finance/PortfolioAttribution documentation built on May 8, 2019, 4:48 a.m.