[Returnanalytics-commits] r2007 - pkg/PortfolioAnalytics/sandbox/attribution

[noreply at r-forge.r-project.org]

Author: braverock
Date: 2012-06-12 13:48:51 +0200 (Tue, 12 Jun 2012)
New Revision: 2007

Added:
   pkg/PortfolioAnalytics/sandbox/attribution/Modigliani.R
Log:
- commit Modigliani-Modigliani measure submitted by Andrii prior to GSoC 2012, with added roxygen documentation

Added: pkg/PortfolioAnalytics/sandbox/attribution/Modigliani.R
===================================================================
--- pkg/PortfolioAnalytics/sandbox/attribution/Modigliani.R	                        (rev 0)
+++ pkg/PortfolioAnalytics/sandbox/attribution/Modigliani.R	2012-06-12 11:48:51 UTC (rev 2007)
@@ -0,0 +1,52 @@
+#' Modigliani-Modigliani measure
+#' 
+#' The Modigliani-Modigliani measure is the portfolio return 
+#' adjusted upward or downward to match the benchmark's standard 
+#' deviation.  This puts the portfolio return and the benchmark
+#' return on 'equal footing' from a standard deviation perspective.
+#' 
+#' This is also analogous to some approaches to 'risk parity' 
+#' portfolios, which use (presumably costless) leverage
+#' to increase the portfolio standard deviation to some target.
+#' 
+#' @param Ra an xts, vector, matrix, data frame, timeSeries or zoo object of
+#' asset returns
+#' @param Rb return vector of the benchmark asset
+#' @param Rf risk free rate, in same period as your returns
+#' @param \dots any other passthrough parameters 
+#' @author Andrii Babii, Brian G. Peterson
+#' @references  J. Christopherson, D. Carino, W. Ferson. 
+#' Portfolio Performance Measurement and Benchmarking. 2009. McGraw-Hill, 97-99.
+#' @seealso \code{\link{SharpeRatio}}, \code{\link{TreynorRatio}}
+#' @examples
+#' 
+#' data(managers)
+#' round(Modigliani(managers[,1,drop=FALSE], managers[,8,drop=FALSE], Rf=.035/12),4)
+#' round(Modigliani(managers[,1:6], managers[,8,drop=FALSE], Rf=.035/12),4)
+#' 
+#' @export
+Modigliani<-function (Ra, Rb, Rf=0, ...)
+{
+    Ra = checkData(Ra)
+    Rb = checkData(Rb)
+    if (!is.null(dim(Rf))) 
+        Rf = checkData(Rf)
+    Ra.ncols = NCOL(Ra)
+    Rb.ncols = NCOL(Rb)
+    pairs = expand.grid(1:Ra.ncols, 1:Rb.ncols)
+    mm<-function(Ra, Rb, Rf){
+        shr = SharpeRatio(Ra, Rf, FUN = "StdDev")
+        MM = shr*StdDev(Rb)+Rf
+        return(MM)
+    }
+    result = apply(pairs, 1, FUN = function(n, Ra, Rb, Rf) mm(Ra[, 
+        n[1]], Rb[, n[2]], Rf), Ra = Ra, Rb = Rb, Rf = Rf)
+    if (length(result) == 1) 
+        return(result)
+    else {
+        dim(result) = c(Ra.ncols, Rb.ncols)
+        colnames(result) = paste("Modigliani-Modigliani measure:", colnames(Rb))
+        rownames(result) = colnames(Ra)
+        return(t(result))
+    }
+}