Adjusted Sharpe ratio of the return distribution
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.
AdjustedSharpeRatio(R, Rf = 0, ...)
R |
an xts, vector, matrix, data frame, timeSeries or zoo object of asset returns |
Rf |
the risk free rate |
... |
any other passthru parameters |
Adjusted Sharpe ratio = SR x [1 + (S/6) x SR - ((K-3) / 24) x SR^2]
where SR is the sharpe ratio with data annualized, S is the skewness and K is the kurtosis
Matthieu Lestel, Brian G. Peterson
Carl Bacon, Practical portfolio performance measurement and attribution, second edition 2008 p.99
Pezier, Jaques and White, Anthony. 2006. The Relative Merits of Investable Hedge Fund Indices and of Funds of Hedge Funds in Optimal Passive Portfolios. http://econpapers.repec.org/paper/rdgicmadp/icma-dp2006-10.htm
data(portfolio_bacon) print(AdjustedSharpeRatio(portfolio_bacon[,1])) #expected 0.7591435 data(managers) print(AdjustedSharpeRatio(managers['1996']))
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