Return.excess {PerformanceAnalytics} | R Documentation |
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]))