inst/tinytest/test_CAPM.R

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

# Set seed
set.seed(0)

# Default test objects / Mock Data Objects
data(managers, package = "PerformanceAnalytics")

Ra = managers[,1,drop=FALSE]
Rb = managers[,8,drop=FALSE]
Rf = managers[,10,drop=FALSE]

xRa = PerformanceAnalytics::Return.excess(Ra, Rf)
xRb = PerformanceAnalytics::Return.excess(Rb, Rf)

# Test the coefficients API

# 1. Ordinary Least Squares
model.lm = PerformanceAnalytics::SFM.coefficients(xRa, xRb, method="LS")
expect_equal(model.lm[1],0.006)
expect_equal(model.lm[2],0.39)

# 2. Robust Estimators (from RobStatTM)
model.lmRob.mOpt = PerformanceAnalytics::SFM.coefficients(xRa, xRb, method="Robust", family="mopt")
expect_equal(model.lmRob.mOpt[1],0.006)
expect_equal(model.lmRob.mOpt[2],0.331)

model.lmRob.opt = PerformanceAnalytics::SFM.coefficients(xRa, xRb, method="Robust", family="opt")
expect_equal(model.lmRob.opt[1], 0.006)
expect_equal(model.lmRob.opt[2],0.332)

model.lmRob.bisq = PerformanceAnalytics::SFM.coefficients(xRa, xRb, method="Robust", family="bisquare")
expect_equal(model.lmRob.bisq[1],0.005)
expect_equal(model.lmRob.bisq[2],0.365)

# Tests for backward compatibility of CAPM lm() based functions

# 1. Functions inside CAPM.beta.R 
model.lm.beta = PerformanceAnalytics::CAPM.beta(Ra, Rb, Rf)
model.lm.beta.bear = PerformanceAnalytics::CAPM.beta.bear(Ra, Rb, Rf)
model.lm.beta.bull = PerformanceAnalytics::CAPM.beta.bull(Ra, Rb, Rf)
model.lm.timingRatio = PerformanceAnalytics::TimingRatio(Ra,Rb,Rf)

expect_equal(model.lm.beta, 0.390071248399483)
expect_equal(model.lm.beta.bear,0.4264215)
expect_equal(model.lm.beta.bull, 0.300546080919799)
expect_equal(model.lm.timingRatio, 0.704809869142456)

# 2. Functions inside CAPM.alpha.R 
model.lm.alpha = PerformanceAnalytics::CAPM.alpha(Ra, Rb, Rf)
expect_equal(model.lm.alpha, 0.00577472877485089)