Jensen's alpha of the return distribution
The Jensen's alpha is the intercept of the regression equation in the Capital Asset Pricing Model and is in effect the exess return adjusted for systematic risk.
CAPM.jensenAlpha(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 |
... |
any other passthru parameters |
alpha = r_p - r_f - beta_p * (b - r_f)
where r_f is the risk free rate, β_r is the regression beta, r_p is the portfolio return and b is the benchmark return
Matthieu Lestel
Carl Bacon, Practical portfolio performance measurement and attribution, second edition 2008 p.72
data(portfolio_bacon) print(SFM.jensenAlpha(portfolio_bacon[,1], portfolio_bacon[,2])) #expected -0.014 data(managers) print(SFM.jensenAlpha(managers['1996',1], managers['1996',8])) print(SFM.jensenAlpha(managers['1996',1:5], managers['1996',8]))
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