AdjustedSharpeRatio: Adjusted Sharpe ratio of the return distribution

Description

Adjusted Sharpe ratio was introduced by Pezier and White (2006) to adjusts for skewness and kurtosis by incorporating a penalty factor for negative skewness and excess kurtosis.

Usage

AdjustedSharpeRatio(R, Rf = 0, ...)

Arguments

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

the risk free rate

…

any other passthru parameters

Details

$$Adjusted Sharpe Ratio = SR * [1 + (\frac{S}{6}) * SR - (\frac{K - 3}{24}) * SR^2]$$

where $SR$ is the sharpe ratio with data annualized, $S$ is the skewness and $K$ is the kurtosis

References

Carl Bacon, Practical portfolio performance measurement and attribution, second edition 2008 p.99

Pezier, Jaques and White, Anthony. 2006. The Relative Merits of Investable Hedge Fund Indices and of Funds of Hedge Funds in Optimal Passive Portfolios. http://econpapers.repec.org/paper/rdgicmadp/icma-dp2006-10.htm

Examples

Run this code

# NOT RUN {
data(portfolio_bacon)
print(AdjustedSharpeRatio(portfolio_bacon[,1])) #expected 0.7591435

data(managers)
print(AdjustedSharpeRatio(managers['1996']))
# }