[R-SIG-Finance] Return.rebalancing and rebalancing on consecutive days

[Peter Carl]

Paul,

This looks like a situation in Return.portfolio where it is being passed a
single row of returns that is causing the error.

> Return.portfolio(e1[7,],weights=w1[1,])
Error in `[.xts`(result, 2:length(result)) : subscript out of bounds
> Return.portfolio(e1[7:8,],weights=w1[1,])
           portfolio.returns
2000-05-09       0.029817496
2000-05-10      -0.002608741

This has to do with how the weights and returns are assumed to be
synchronized through time.  Both returns and weights are thought to be
timestamped at the end-of-period, so the weights are shifted forward to
apply to the next month's returns.  From the documentation:

Rebalancing periods can be thought of as taking effect immediately after
the close of the bar. So, a March 31 rebalancing date will actually be in
effect for April 1. A December 31 rebalancing date will be in effect on
Jan 1, and so forth. This convention was chosen because it fits with
common usage, and because it simplifies xts Date subsetting via endpoints.

So this appears to be a corner case where a single row of returns is being
passed in and the weights get shifted out of bounds.

Thanks for the reproducible error.  We'll take a look and find a solution.

pcc
-- 
Peter Carl
http://www.braverock.com/peter

> When I rebalance my portfolio on consecutive days, I get an error:
> Error in `[.xts`(result, 2:length(result)) : subscript out of bounds.
>
> So, I wonder what I am doing wrong.
>
> Below is a code snippet both with and without the error. The first is
> rebalanced on consecutive days whereas the second one has at least a
> day between all rebalancing. I ran debug on Return.rebalancing. With
> consecutive rebalancing days, the only thing I could find was the
> 'from' and 'to' variables had the same date when the 'R' variable was
> subset.
>
> data(edhec)
> data(weights)
>
> days <- c("2000-05-01 18:00:00 MDT", "2000-05-02 18:00:00 MDT",
>           "2000-05-03 18:00:00 MDT", "2000-05-04 18:00:00 MDT",
>           "2000-05-07 18:00:00 MDT", "2000-05-08 18:00:00 MDT",
>           "2000-05-09 18:00:00 MDT", "2000-05-10 18:00:00 MDT",
>           "2000-05-11 18:00:00 MDT", "2000-05-14 18:00:00 MDT",
>           "2000-05-15 18:00:00 MDT", "2000-05-16 18:00:00 MDT",
>           "2000-05-17 18:00:00 MDT", "2000-05-18 18:00:00 MDT",
>           "2000-05-21 18:00:00 MDT", "2000-05-22 18:00:00 MDT",
>           "2000-05-23 18:00:00 MDT", "2000-05-24 18:00:00 MDT",
>           "2000-05-25 18:00:00 MDT", "2000-05-29 18:00:00 MDT",
>           "2000-05-30 18:00:00 MDT", "2000-05-31 18:00:00 MDT")
>
> may.reb <- c("2000-05-09 18:00:00 MDT", "2000-05-10 18:00:00 MDT",
>              "2000-05-15 18:00:00 MDT")
>
> may.reb.2 <- c("2000-05-09 18:00:00 MDT", "2000-05-11 18:00:00 MDT",
>                "2000-05-15 18:00:00 MDT")
>
> e1 <- edhec[1:length(days), ]
> index(e1) <- as.Date(days)
>
> w1 <- weights[1:3, ]
> index(w1) <- as.Date(may.reb)
> Return.rebalancing(e1, w1)
>
> w2 <- weights[1:3, ]
> index(w2) <- as.Date(may.reb.2)
> Return.rebalancing(e1, w2)
>
> Session Info:
> R version 2.15.2 (2012-10-26)
> Platform: i386-w64-mingw32/i386 (32-bit)
>
> locale:
> [1] LC_COLLATE=English_United States.1252
> [2] LC_CTYPE=English_United States.1252
> [3] LC_MONETARY=English_United States.1252
> [4] LC_NUMERIC=C
> [5] LC_TIME=English_United States.1252
>
> attached base packages:
> [1] splines   stats     graphics  grDevices utils     datasets  methods
> [8] base
>
> other attached packages:
>  [1] reshape_0.8.4              plyr_1.8
>  [3] latticeExtra_0.6-24        RColorBrewer_1.0-5
>  [5] Hmisc_3.10-1               survival_2.36-14
>  [7] PerformanceAnalytics_1.1.0 quantmod_0.4-0
>  [9] Defaults_1.1-1             TTR_0.21-1
> [11] xts_0.9-3.2                zoo_1.7-10
> [13] lattice_0.20-13
>
> loaded via a namespace (and not attached):
> [1] cluster_1.14.3  compiler_2.15.2 grid_2.15.2     tools_2.15.2
>
> Any guidance is appreciated.
>
> Thank you,
>
> ----
> Paul Ramer, CAIA, CFA
> paul.ramer at gmail.com
> (303) 359-4192
>
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