GRS.Powerfunc {GRS.test} | R Documentation |
Power functions for the GRS test
Description
The function plots the power functions for a range of sample size (T), given the other parameter values
Usage
GRS.Powerfunc(Tvec, N, K, theta, alpha = 0.05)
Arguments
Tvec |
a vector of sample sizes |
N |
the number of portfolio returns |
K |
the number of risk factors |
theta |
maximum Sharpe ratio of the K factor portfolios |
alpha |
the level of significance, default is 0.05 |
Details
The power is plotted against the ratio=theta/thetas, the proprotion of potential efficiency
Value
Power: Matrix of power values plotted
Note
Under H0: ratio = 1, so the power = alpha when ratio = 1.
The power increases as the ratio declines from 1.
The power increases with sample size, so the upper power function is associated with larger sample size.
Author(s)
Jae H. Kim
References
Gibbons, Ross, Shanken, 1989. A test of the efficiency of a given portfolio, Econometrica, 57,1121-1152. <DOI:10.2307/1913625>
See Also
GRS (1989) <DOI:10.2307/1913625>
Examples
GRS.Powerfunc(Tvec=c(60,120),N=25, K=3,theta=0.3) # Figure 2 of Kim and Shamsuddin (2016)