MSquaredExcess | R Documentation |
M squared excess is the quantity above the standard M. There is a geometric excess return which is better for Bacon and an arithmetic excess return
MSquaredExcess(Ra, Rb, Rf = 0, Method = c("geometric", "arithmetic"), ...)
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 |
Method |
one of "geometric" or "arithmetic" indicating the method to use to calculate MSquareExcess |
... |
any other passthru parameters |
M^2 excess (geometric) = \frac{1 + M^2}{1 + b} - 1
M^2 excess (arithmetic) = M^2 - b
where M^2
is MSquared and b
is the benchmark annualised return.
Matthieu Lestel
Carl Bacon, Practical portfolio performance measurement and attribution, second edition 2008 p.68
data(portfolio_bacon)
MSquaredExcess(portfolio_bacon[,1], portfolio_bacon[,2]) #expected -0.00998
MSquaredExcess(portfolio_bacon[,1], portfolio_bacon[,2], Method="arithmetic") #expected -0.011
data(managers)
MSquaredExcess(managers['1996',1], managers['1996',8])
MSquaredExcess(managers['1996',1:5], managers['1996',8])
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