PeerPerformance (version 2.3.2)

msharpe: Compute modified Sharpe ratio

Description

Function which computes the modified Sharpe ratio

Usage

msharpe(X, level = 0.9, na.rm = TRUE, na.neg = TRUE)

Value

Scalar or a vector (of size \(N\)) with the modified Sharpe ratios.

Arguments

X

Vector (of length \(T\)) or matrix (of size \(T \times N\)) of returns. NA values are allowed.

level

Modified Value-at-Risk level. Default: level = 0.90.

na.rm

A logical value indicating whether NA values should be stripped before the computation. Default na.rm = TRUE.

na.neg

A logical value indicating whether NA values should be returned if a negative modified Value-at-Risk is obtained. Default na.neg = TRUE.

Author

David Ardia and Kris Boudt.

Details

The modified Sharpe ratio (Favre and Galeano 2002) is one industry standard for measuring the absolute risk adjusted performance of hedge funds.

References

Ardia, D., Boudt, K. (2015). Testing equality of modified Sharpe ratios. Finance Research Letters 13, 97--104.

Ardia, D., Boudt, K. (2018). The peer performance ratios of hedge Funds. Journal of Banking and Finance 87, 351--368.

Favre, L., Galeano, J.A. (2002). Mean-modified Value-at-Risk Optimization with Hedge Funds. Journal of Alternative Investments 5(2), 21--25.

Gregoriou, G. N., Gueyie, J.-P. (2003). Risk-adjusted performance of funds of hedge funds using a modified Sharpe ratio. Journal of Wealth Management 6(3), 77--83.

See Also

msharpeTesting, msharpeScreening and sharpe.

Examples

## Load the data (randomized data of monthly hedge fund returns)
data('hfdata')

out = msharpe(hfdata)
print(out)

out = msharpe(hfdata, na.rm = FALSE)
print(out)