CAPM.alpha: calculate single factor model (CAPM) alpha

In ecjbosu/PerformanceAnalytics: Econometric tools for performance and risk analysis.

Description

This is a wrapper for calculating a single factor model (CAPM) alpha.

Usage

CAPM.alpha(Ra, Rb, Rf = 0)

Arguments

Ra	an xts, vector, matrix, data frame, timeSeries or zoo object of asset returns
Rb	return vector of the benchmark asset
Rf	risk free rate, in same period as your returns

Details

"Alpha" purports to be a measure of a manager's skill by measuring the portion of the managers returns that are not attributable to "Beta", or the portion of performance attributable to a benchmark.

While the classical CAPM has been almost completely discredited by the literature, it is an example of a simple single factor model, comparing an asset to any arbitrary benchmark.

Author(s)

Peter Carl

References

Sharpe, W.F. Capital Asset Prices: A theory of market equilibrium under conditions of risk. Journal of finance, vol 19, 1964, 425-442.
Ruppert, David. Statistics and Finance, an Introduction. Springer. 2004.

See Also

CAPM.beta CAPM.utils

Examples

# First we load the data
    data(managers)
    CAPM.alpha(managers[,1,drop=FALSE],
			managers[,8,drop=FALSE],
			Rf=.035/12)
    CAPM.alpha(managers[,1,drop=FALSE],
			managers[,8,drop=FALSE],
			Rf = managers[,10,drop=FALSE])
    CAPM.alpha(managers[,1:6],
			managers[,8,drop=FALSE],
			Rf=.035/12)
    CAPM.alpha(managers[,1:6],
			managers[,8,drop=FALSE],
			Rf = managers[,10,drop=FALSE])
    CAPM.alpha(managers[,1:6],
			managers[,8:7,drop=FALSE],
			Rf=.035/12)
    CAPM.alpha(managers[,1:6],
			managers[,8:7,drop=FALSE],
			Rf = managers[,10,drop=FALSE])

ecjbosu/PerformanceAnalytics documentation built on March 24, 2020, 3:43 a.m.