[R-SIG-Finance] making sense of 100's of funds

paul sorenson sf at metrak.com
Mon Aug 13 10:52:40 CEST 2007


Thanks for the tips.  I am somewhat of a cynic also. When it is my own
retirement fund, academic meets real-life in a fairly personal way!  I
have heard figures that something like 98% (from memory) of Australian's
"don't understand superannuation".

I am trying to get myself well into the 2%.  Writing R code leveraging
some of the great packages out there is just a method of learning which
I find works for me.  It can be slow going at times though.

I have picked out 8 funds to crunch through and using the ASX SP200 as
the benchmark for exercising my code.  My "practice" data set is at
http://www.metrak.com/tmp/exitprices.csv and I retrieved the SP200 using
get.hist.quote("^AXJO", start="2002-01-01", quote="Close", retclass="zoo").

I have used CalculateReturns from PerformanceAnalytics to create returns
as zoo objects so hopefully I will be able to calculate the alphas.  If
I understand your comment below, I am looking for a more positive
intercept on my choice of fund compared with the benchmark?


Tobias Muhlhofer wrote:
> Paul,
> Unless you are looking at index funds, you need to see whether your
> funds produce alpha. To do this, pick a set of benchmarks according to
> your fund's style and investment strategy, like Morningstar category
> index or something like that (or perhaps just the general stock market
> plus the two Fama-French factors), regress the fund's returns on the
> benchmark returns, and see whether you have a significantly positive
> intercept after fees. This is the best way of measuring systematic-risk
> adjusted returns.
> Being a finance academic (and therefore a cynic), and judging from my
> own research, if benchmarked correctly, very few fund managers generate
> positively significant alphas, and so I personally buy index funds for
> whatever style I want to invest in, and there I choose the one with the
> lowest expense ratio.
> Best,
> 	Toby
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