Return.annualized: calculate an annualized return for comparing instruments with...

In braverock/PerformanceAnalytics: Econometric Tools for Performance and Risk Analysis

calculate an annualized return for comparing instruments with different length history

Description

An average annualized return is convenient for comparing returns.

Usage

Return.annualized(R, scale = NA, geometric = TRUE)

Arguments

R	an xts, vector, matrix, data frame, timeSeries or zoo object of asset returns
scale	number of periods in a year (daily scale = 252, monthly scale = 12, quarterly scale = 4)
geometric	utilize geometric chaining (TRUE) or simple/arithmetic chaining (FALSE) to aggregate returns, default TRUE

Details

Annualized returns are useful for comparing two assets. To do so, you must scale your observations to an annual scale by raising the compound return to the number of periods in a year, and taking the root to the number of total observations:

prod(1+R_{a})^{\frac{scale}{n}}-1=\sqrt[n]{prod(1+R_{a})^{scale}}-1

where scale is the number of periods in a year, and n is the total number of periods for which you have observations.

For simple returns (geometric=FALSE), the formula is:

\overline{R_{a}} \cdot scale

Author(s)

Peter Carl

References

Bacon, Carl. Practical Portfolio Performance Measurement and Attribution. Wiley. 2004. p. 6

See Also

Return.cumulative,

Examples

data(managers)
Return.annualized(managers[,1,drop=FALSE])
Return.annualized(managers[,1:8])
Return.annualized(managers[,1:8],geometric=FALSE)

braverock/PerformanceAnalytics documentation built on Feb. 16, 2024, 5:37 a.m.