Trading (version 3.2)

InformationAdjustedBeta: Information Adjusted Beta

Description

Calculates the Information-Adjusted Beta between the track records of two assets/strategies which covers for cases whereby the 'typical' linearity and Gaussian I.I.D assumptions do not hold. The normalized cross sample entropy has been utilized for the mutual information estimation.

Usage

InformationAdjustedBeta(x, y, m = 2, r = 0.2)

Value

The information adjusted Beta

Arguments

x

a vector containing the track record of the underlying asset/strategy (can be a data.table, data.frame, vector etc)

y

a vector containing the track record of the underlying asset/strategy (can be a data.table, data.frame, vector etc)

m

an integer value defining the embedding dimension for the sample entropy calculation, default value is 2

r

a double value defining the tolerance for the sample entropy calculation, default value is 0.2

Author

Tasos Grivas <[e-mail]>

References

https://github.com/devisechain/Devise/blob/master/yellow_paper.pdf

Examples

x = PerformanceAnalytics::edhec[,c("Short Selling")]
y = PerformanceAnalytics::edhec[,c("Convertible Arbitrage")]
Information_Adjusted_Beta = InformationAdjustedBeta(x, y, m=2, r=0.2)