CAPM.jensenAlpha {PerformanceAnalytics} | R Documentation |
Jensen's alpha of the return distribution
Description
The Jensen's alpha is the intercept of the regression equation in the Capital Asset Pricing Model and is in effect the exess return adjusted for systematic risk.
Usage
CAPM.jensenAlpha(Ra, Rb, Rf = 0, ..., method = "LS", family = "mopt")
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 |
... |
any other pass thru parameters |
method |
(Optional): string representing linear regression model, "LS" for Least Squares and "Rob" for robust |
family |
(Optional): If method == "Rob": This is a string specifying the name of the family of loss function to be used (current valid options are "bisquare", "opt" and "mopt"). Incomplete entries will be matched to the current valid options. Defaults to "mopt". Else: the parameter is ignored |
Details
\alpha = r_p - r_f - \beta_p * (b - r_f)
where r_f
is the risk free rate, \beta_r
is the regression beta,
r_p
is the portfolio return and b is the benchmark return
Author(s)
Matthieu Lestel, Dhairya Jain
References
Carl Bacon, Practical portfolio performance measurement and attribution, second edition 2008 p.72
Examples
data(portfolio_bacon)
print(SFM.jensenAlpha(portfolio_bacon[,1], portfolio_bacon[,2])) #expected -0.014
data(managers)
print(SFM.jensenAlpha(managers['1996',1], managers['1996',8]))
print(SFM.jensenAlpha(managers['1996',1:5], managers['1996',8]))