PerformanceAnalytics (version 1.1.0)

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

R

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

Rf

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

Examples

data(portfolio_bacon)
print(AdjustedSharpeRatio(portfolio_bacon[,1])) #expected 0.81

data(managers)
print(AdjustedSharpeRatio(managers['1996']))
print(AdjustedSharpeRatio(managers['1996',1]))