Calculates the returns of an asset in excess of the given risk free rate
Calculates the returns of an asset in excess of the given "risk free rate" for the period.
Return.excess(R, Rf = 0)
R |
an xts, vector, matrix, data frame, timeSeries or zoo object of asset returns |
Rf |
risk free rate, in same period as your returns, or as a single digit average |
Ideally, your risk free rate will be for each period you have returns observations, but a single average return for the period will work too.
Mean of the period return minus the period risk free rate
mean(Ra-Rf=0)
OR
mean of the period returns minus a single numeric risk free rate
mean(R)-rf
Note that while we have, in keeping with common academic usage, assumed that the second parameter will be a risk free rate, you may also use any other timeseries as the second argument. A common alteration would be to use a benchmark to produce excess returns over a specific benchmark, as demonstrated in the examples below.
Peter Carl
Bacon, Carl. Practical Portfolio Performance Measurement and Attribution. Wiley. 2004. p. 47-52
data(managers) head(Return.excess(managers[,1,drop=FALSE], managers[,10,drop=FALSE])) head(Return.excess(managers[,1,drop=FALSE], .04/12)) head(Return.excess(managers[,1:6], managers[,10,drop=FALSE])) head(Return.excess(managers[,1,drop=FALSE], managers[,8,drop=FALSE]))
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