PerformanceAnalytics (version 1.1.0)

FamaBeta: Fama beta of the return distribution

Description

Fama beta is a beta used to calculate the loss of diversification. It is made so that the systematic risk is equivalent to the total portfolio risk.

Usage

FamaBeta(Ra, Rb, ...)

Arguments

Ra

an xts, vector, matrix, data frame, timeSeries or zoo object of asset returns

Rb

return vector of the benchmark asset

...

any other passthru parameters

Details

$$\beta_F = \frac{\sigma_P}{\sigma_M}$$

where $\sigma_P$ is the portfolio standard deviation and $\sigma_M$ is the market risk

References

Carl Bacon, Practical portfolio performance measurement and attribution, second edition 2008 p.78

Examples

data(portfolio_bacon)
print(FamaBeta(portfolio_bacon[,1], portfolio_bacon[,2])) #expected 1.03

data(managers)
print(FamaBeta(managers['1996',1], managers['1996',8]))
print(FamaBeta(managers['1996',1:5], managers['1996',8]))