PerformanceAnalytics (version 0.9.6)

SmoothingIndex: calculate Normalized Getmansky Smoothing Index

Description

Proposed by Getmansky et al to provide a normalized measure of liquidity risk. The index will produces a number from zero to one. A low number indicates low liquidity risk. A number trending towards one indicates a higher liquidity risk.

Usage

SmoothingIndex(Ra, ...)

Arguments

Ra

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

...

any other passthru parameters

Value

• a value ranging from 0 to 1 (not enforced in this function yet)

References

Chan, Nicholas, Mila Getmansky, Shane M. Haas, and Andrew W. Lo. 2005. Systemic Risk and Hedge Funds. NBER Working Paper Series (11200). Getmansky, Mila, Andrew W. Lo, and Igor Makarov. 2004. An Econometric Model of Serial Correlation and Illiquidity in Hedge Fund Returns. Journal of Financial Economics (74): 529-609.

Examples

SmoothingIndex(managers[,8,drop=FALSE])
data(managers)
data(edhec)
indexes=merge(managers[,8:10],edhec)
indexes=na.omit(indexes)
sapply(indexes,FUN=SmoothingIndex)