MSquaredExcess: M squared excess of the return distribution

In guillermozbta/portafolio-master: Econometric tools for performance and risk analysis.

Description

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

Usage

MSquaredExcess(Ra, Rb, Rf = 0, Method = c("geometric", "arithmetic"), ...)

Arguments

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

Details

MSquared excess (geometric) = (1+M^2)/(1+b) - 1

MSquared excess (arithmetic) = M^2 - b

where M^2 is MSquared and b is the benchmark annualised return.

Author(s)

Matthieu Lestel

References

Carl Bacon, Practical portfolio performance measurement and attribution, second edition 2008 p.68

Examples

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])

guillermozbta/portafolio-master documentation built on May 11, 2019, 7:20 p.m.