R/AdjustedSharpeRatio.R

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

#' Adjusted Sharpe ratio of the return distribution
#'
#' Adjusted Sharpe ratio was introduced by Pezier and White (2006) to adjusts
#' for skewness and kurtosis by incorporating a penalty factor for negative skewness
#' and excess kurtosis.
#'
#' \deqn{Adjusted Sharpe Ratio = SR * [1 + (\frac{S}{6}) * SR - (\frac{K - 3}{24}) * SR^2]}{Adjusted Sharpe ratio = SR x [1 + (S/6) x SR - ((K-3) / 24) x SR^2]}
#'
#' where \eqn{SR} is the sharpe ratio with data annualized, \eqn{S} is the skewness and \eqn{K} is the kurtosis
#' 
#' @aliases AdjustedSharpeRatio
#' @param R an xts, vector, matrix, data frame, timeSeries or zoo object of
#' asset returns
#' @param Rf the risk free rate
#' @param \dots any other passthru parameters
#' @author Matthieu Lestel
#' @references Carl Bacon, \emph{Practical portfolio performance measurement 
#' and attribution}, second edition 2008 p.99
#' 
#' @keywords ts multivariate distribution models
#' @examples
#' data(portfolio_bacon)
#' print(AdjustedSharpeRatio(portfolio_bacon[,1])) #expected 0.81
#'
#' data(managers)
#' print(AdjustedSharpeRatio(managers['1996']))
#' print(AdjustedSharpeRatio(managers['1996',1])) 
#'
#' @export 

AdjustedSharpeRatio <- function (R, Rf = 0, ...)
{
    R = checkData(R)

    if (ncol(R)==1 || is.null(R) || is.vector(R)) {
       calcul = FALSE
        for (i in (1:length(R))) {
     	     if (!is.na(R[i])) {
     	    	calcul = TRUE
	     }
        }		      
        if(!calcul) {
	  result = NA
	}
	else {
	     period = Frequency(R)
             R = na.omit(R)
       	     n = length(R)
       	     Rp = (prod(1+R/100)^(period/length(R))-1)*100
       	     Sigp = sqrt(sum((R-mean(R))^2)/n)*sqrt(period)
       	     SR = (Rp - Rf) / Sigp
       	     K = kurtosis(R, method = "moment")
       	     S = skewness(R)
       	     result = SR*(1+(S/6)*SR-((K-3)/24)*SR^2)
        }
       return(result)
    }  
    else {
        result = apply(R, MARGIN = 2, AdjustedSharpeRatio, Rf = Rf, period = period, ...)
        result<-t(result)
        colnames(result) = colnames(R)
        rownames(result) = paste("Adjusted Sharpe ratio (Risk free = ",Rf,")", sep="")
        return(result)
    }
}

###############################################################################
# R (http://r-project.org/) Econometrics for Performance and Risk Analysis
#
# Copyright (c) 2004-2014 Peter Carl and Brian G. Peterson
#
# This R package is distributed under the terms of the GNU Public License (GPL)
# for full details see the file COPYING
#
# $Id: AdjustedSharpeRatio.R 3301 2014-01-18 15:26:12Z braverock $
#
###############################################################################