Conditional Drawdown beta

The conditional drawdown beta is a measure of capturing performance under market drawdowns and it is given by the ratio of the average rate of return of the instrument over time periods corresponding to the \((1-p)T\) largest drawdowns of the benchmark portfolio.

The difference in CDaR and standard beta boils down to the fact that the standard beta accounts for the fund returns over the whole return history, including the upside while CDaR beta focuses only on market drawdowns.

CDaR.beta(R, Rm, p = 0.95, weights = NULL, geometric = TRUE, type = NULL, ...)

Arguments

R

an xts, vector, matrix, data frame, timeSeries or zoo object of asset returns

Rm

an xts, vector, matrix, data frame, timeSeries or zoo object of benchmark returns

p

confidence level for calculation ,default(p=0.95)

weights

portfolio weighting vector, default NULL, see Details

geometric

utilize geometric chaining (TRUE) or simple/arithmetic chaining (FALSE) to aggregate returns, default TRUE

type

(Optional) Overrides the p parameter. If "average" then p = 0 and if "max" then p = 1

...

any passthru variable.

References

Zabarankin, M., Pavlikov, K., and S. Uryasev. Capital Asset Pricing Model (CAPM) with Drawdown Measure.Research Report 2012-9, ISE Dept., University of Florida,September 2012.

See also

CDaR.alpha CDaR

Author

Tasos Grivas <tasos@openriskcalculator.com>,Pulkit Mehrotra

Examples

data(edhec)
CDaR.beta(edhec[,1],edhec[,2]) 
#>         5% 
#> -0.8031502 
CDaR.beta(edhec[,1],edhec[,2],type="max")
#>        max 
#> -0.7480649 
CDaR.beta(edhec[,1],edhec[,2],type="average")
#>    average 
#> -0.9412998