PerformanceAnalytics (version 1.1.0)

ProspectRatio: Prospect ratio of the return distribution

Description

Prospect ratio is a ratio used to penalise loss since most people feel loss greater than gain

Usage

ProspectRatio(R, MAR, ...)

Arguments

R

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

MAR

the minimum acceptable return

...

any other passthru parameters

Details

$$ProspectRatio(R) = \frac{\frac{1}{n}*\sum^{n}_{i=1}(Max(r_i,0)+2.25*Min(r_i,0) - MAR)}{\sigma_D}$$

where $n$ is the number of observations of the entire series, MAR is the minimum acceptable return and $\sigma_D$ is the downside risk

References

Carl Bacon, Practical portfolio performance measurement and attribution, second edition 2008 p.100

Examples

data(portfolio_bacon)
MAR = 0.05
print(ProspectRatio(portfolio_bacon[,1], MAR)) #expected -0.134

data(managers)
MAR = 0
print(ProspectRatio(managers['1996'], MAR))
print(ProspectRatio(managers['1996',1], MAR))