JFE (version 2.5.9)

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, FUN = "StdDev")

Arguments

R

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

Rf

the risk free rate

FUN

one of "StdDev" or "VaR" or "ES" to use as the denominator for unadjusted Sharpe ratio, default="StdDev"

Author

Ho Tsung-wu <[e-mail]>, College of Management, National Taiwan Normal University.

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. Check https://econpapers.repec.org/paper/rdgicmadp/icma-dp2006-10.htm
See also package PerformanceAnalytics.

Examples

    data(assetReturns)

AdjustedSharpeRatio(assetReturns)