MSquared | R Documentation |
M squared is a risk adjusted return useful to judge the size of relative performance between differents portfolios. With it you can compare portfolios with different levels of risk.
MSquared(Ra, Rb, Rf = 0, ...)
Ra |
an xts, vector, matrix, data frame, timeSeries or zoo object of asset return |
Rb |
return vector of the benchmark asset |
Rf |
risk free rate, in same period as your returns |
... |
any other passthru parameters |
M^2 = r_P + SR * (\sigma_M - \sigma_P) = (r_P - r_F) * \frac{\sigma_M}{\sigma_P} + r_F
where r_P
is the portfolio return annualized, \sigma_M
is the market
risk and \sigma_P
is the portfolio risk
Matthieu Lestel
Carl Bacon, Practical portfolio performance measurement and attribution, second edition 2008 p.67-68
data(portfolio_bacon)
print(MSquared(portfolio_bacon[,1], portfolio_bacon[,2])) #expected 0.10062
data(managers)
print(MSquared(managers['1996',1], managers['1996',8]))
print(MSquared(managers['1996',1:5], managers['1996',8]))
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