sharpe_ratio: Sharpe Ratio

Description Usage Arguments Value Note Author(s) References See Also Examples

Description

Calculate Sharpe ratio based on a vector of investment gains or prices. The formula is: (mean(gains) - rf) / sd(gains). Here rf is some risk- free rate of return, and gains is a vector of gains (usually daily, but could be any time interval).

Usage

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sharpe.ratio(gains = NULL,
             prices = NULL,
             rf = 0,
             nas = FALSE)

Arguments

gains

Numeric vector of investment gains.

prices

Numeric vector of investment prices (typically daily closing prices).

rf

Risk-free rate of return hypothetically available to the investor.

nas

If TRUE, function finds and removes any missing values (NAs) in prices. The default is FALSE to maximize speed for the usual case where there are no missing values.

Value

Numeric value indicating the Sharpe ratio.

Note

Several definitions of Sharpe ratio are commonly used; this may or may not be the version you prefer.

Author(s)

Dane R. Van Domelen

References

Acknowledgment: This material is based upon work supported by the National Science Foundation Graduate Research Fellowship under Grant No. DGE-0940903.

See Also

gains.rate, prices.rate, mdd, sortino.ratio, rrr

Examples

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# Randomly generate daily stock gains over a 5-year period
set.seed(123)
stock.gains <- rnorm(252 * 5, 0.0005, 0.01)

# Calculate Sharpe ratio using risk-free return of 0
sharpe.ratio(stock.gains)

stocks documentation built on May 2, 2019, 5:22 p.m.