Calculate Sortino ratio based on a vector of gains (or prices). The formula is: (mean(gains) - rf) / sd(negatives(gains)). Here rf is some risk-free rate of return, gains is a vector of gains (usually daily, but could be weekly, monthly, or some other time interval), and negatives(gains) gets the subset of gains that are negative. User can specify prices or gains.
Usage
sortino(gains = NULL, prices = NULL, rf = 0)
Arguments
gains
Numeric vector of gains.
prices
Numeric vector of stock prices (typically daily closing prices).
rf
Risk-free rate of return hypothetically available to the investor.
Value
Numeric value indicating the Sortino ratio.
Details
NA
References
Acknowledgment: This material is based upon work supported by the National Science Foundation Graduate Research Fellowship under Grant No. DGE-0940903.
# Randomly generate daily stock gains over a 5-year periodstock.gains <- rnorm(251*5, 0.0005, 0.01)
# Calculate Sortino ratio using risk-free return of 0sortino(stock.gains)