Omega-Sharpe ratio of the return distribution
The Omega-Sharpe ratio is a conversion of the omega ratio to a ranking statistic in familiar form to the Sharpe ratio.
OmegaSharpeRatio(R, MAR = 0, ...)
R |
an xts, vector, matrix, data frame, timeSeries or zoo object of asset returns |
MAR |
Minimum Acceptable Return, in the same periodicity as your returns |
... |
any other passthru parameters |
To calculate the Omega-Sharpe ration we subtract the target (or Minimum Acceptable Returns (MAR)) return from the portfolio return and we divide it by the opposite of the Downside Deviation.
OmegaSharpeRatio(R,MAR) = (Rp - Rt) / -DownsidePotential(R,MAR)
where n is the number of observations of the entire series
Matthieu Lestel
Carl Bacon, Practical portfolio performance measurement and attribution, second edition 2008, p.95
data(portfolio_bacon) MAR = 0.005 print(OmegaSharpeRatio(portfolio_bacon[,1], MAR)) #expected 0.29 MAR = 0 data(managers) print(OmegaSharpeRatio(managers['1996'], MAR)) print(OmegaSharpeRatio(managers['1996',1], MAR)) #expected 3.60
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