Selectivity of the return distribution

Selectivity is the same as Jensen's alpha

Selectivity(Ra, Rb, Rf = 0, ...)

Arguments

Ra

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

Rb

return vector of the benchmark asset

Rf

risk free rate, in same period as your returns

...

any other passthru parameters

Details

$$Selectivity = r_p - r_f - \beta_p * (b - r_f)$$

where \(r_f\) is the risk free rate, \(\beta_r\) is the regression beta, \(r_p\) is the portfolio return and b is the benchmark return

References

Carl Bacon, Practical portfolio performance measurement and attribution, second edition 2008 p.78

Author

Matthieu Lestel

Examples

data(portfolio_bacon)
print(Selectivity(portfolio_bacon[,1], portfolio_bacon[,2])) #expected -0.0141
#> [1] -0.01416944

data(managers)
print(Selectivity(managers['2002',1], managers['2002',8]))
#> [1] 0.03780793
print(Selectivity(managers['2002',1:5], managers['2002',8]))
#>                                      HAM1       HAM2        HAM3       HAM4
#> Jensen's Alpha (Risk free = 0) 0.03780793 -0.1015863 -0.09419238 0.09430126
#>                                       HAM5
#> Jensen's Alpha (Risk free = 0) -0.08667631