calculate single factor model (CAPM) alpha
This is a wrapper for calculating a single factor model (CAPM) alpha.
CAPM.alpha(Ra, Rb, Rf = 0)
Ra |
an xts, vector, matrix, data frame, timeSeries or zoo object of asset returns |
Rb |
return vector of the benchmark asset |
Rf |
risk free rate, in same period as your returns |
"Alpha" purports to be a measure of a manager's skill by measuring the portion of the managers returns that are not attributable to "Beta", or the portion of performance attributable to a benchmark.
While the classical CAPM has been almost completely discredited by the literature, it is an example of a simple single factor model, comparing an asset to any arbitrary benchmark.
Peter Carl
Sharpe, W.F. Capital Asset Prices: A theory of market
equilibrium under conditions of risk. Journal of finance, vol 19,
1964, 425-442.
Ruppert, David. Statistics and Finance, an
Introduction. Springer. 2004.
# First we load the data
data(managers)
CAPM.alpha(managers[,1,drop=FALSE],
managers[,8,drop=FALSE],
Rf=.035/12)
CAPM.alpha(managers[,1,drop=FALSE],
managers[,8,drop=FALSE],
Rf = managers[,10,drop=FALSE])
CAPM.alpha(managers[,1:6],
managers[,8,drop=FALSE],
Rf=.035/12)
CAPM.alpha(managers[,1:6],
managers[,8,drop=FALSE],
Rf = managers[,10,drop=FALSE])
CAPM.alpha(managers[,1:6],
managers[,8:7,drop=FALSE],
Rf=.035/12)
CAPM.alpha(managers[,1:6],
managers[,8:7,drop=FALSE],
Rf = managers[,10,drop=FALSE])Please choose more modern alternatives, such as Google Chrome or Mozilla Firefox.