msharpe {PeerPerformance}

Compute modified Sharpe ratio

Description

Function which computes the modified Sharpe ratio

Usage

msharpe(X, level = 0.9, na.rm = TRUE, na.neg = TRUE)

Arguments

X

Vector (of lenght T) or matrix (of size T \times N) of returns. NA values are allowed.

level

Modified Value-at-Risk level. Default: level = 0.90.

na.rm

A logical value indicating whether NA values should be stripped before the computation. Default na.rm = TRUE.

na.neg

A logical value indicating whether NA values should be returned if a negative modified Value-at-Risk is obtained. Default na.neg = TRUE.

Details

The modified Sharpe ratio (Favre and Galeano 2002) is one industry standard for measuring the absolute risk adjusted performance of hedge funds.

Value

Scalar or a vector (of size N) with the modified Sharpe ratios.

Author(s)

David Ardia and Kris Boudt.

References

Ardia, D., Boudt, K. (2015). Testing equality of modified Sharpe ratios. Finance Research Letters 13, pp.97–104. doi: 10.1016/j.frl.2015.02.008

Ardia, D., Boudt, K. (2016). The Peer Ratios Performance of Hedge Funds. Working paper. doi: 10.2139/ssrn.2000901

Favre, L., Galeano, J.A. (2002). Mean-modified Value-at-Risk Optimization with Hedge Funds. Journal of Alternative Investments 5(2), pp.21–25. doi: 10.3905/jai.2002.319052

Gregoriou, G. N., Gueyie, J.-P. (2003). Risk-adjusted performance of funds of hedge funds using a modified Sharpe ratio. Journal of Wealth Management 6(3), pp.77–83. doi: 10.3905/jwm.2003.442378

See Also

msharpeTesting, msharpeScreening and sharpe.

Examples

## Load the data (randomized data of monthly hedge fund returns)
data('hfdata')

out = msharpe(hfdata)
print(out)

out = msharpe(hfdata, na.rm = FALSE)
print(out)