[R-SIG-Finance] Return.rebalancing contemporaneous calculation

[Charles Duranceau]

Hello Brian, 
Thank you for your feedback. 

Version Info: 
platform       x86_64-w64-mingw32          
arch           x86_64                      
os             mingw32                     
system         x86_64, mingw32             
status                                     
major          3                           
minor          1.0                         
year           2014                        
month          04                          
day            10                          
svn rev        65387                       
language       R                           
version.string R version 3.1.0 (2014-04-10)
nickname       Spring Dance               

Package: 
 "PerformanceAnalytics" VERSION 1.4.3541 from CRAN   ---- project.org/bin/windows/contrib/3.1/PerformanceAnalytics_1.4.3541.zip

Here's a detailed example:

# Define Returns
mret=data.frame(ra=c(0.1,0.11,0.09),rb=c(0.25,0.2,-0.4),rc=c(0.15,0.12,0.02))
time_index<-seq(as.Date("2003/05/01"), by = "month", length.out = 3)-1             # last day of the month
mret<-as.xts(mret,time_index)
weight_constant<-c(0.5,0.2,0.3)
ret_pfolio<-Return.portfolio(mret,weight_constant,geometric = FALSE)


weight_reb<-t(matrix(weight_constant,3,3))
weight_reb<-as.xts(weight_reb,time_index)                                                                  # fixed for the analysis
ret_rebal<-Return.rebalancing(mret,weight_reb,geometric = FALSE)

cbind(ret_pfolio,ret_rebal)



Thank you
Best Regards

-----Original Message-----
From: r-sig-finance-bounces at r-project.org [mailto:r-sig-finance-bounces at r-project.org] On Behalf Of Brian G. Peterson
Sent: Wednesday, October 08, 2014 3:33 PM
To: r-sig-finance at r-project.org
Subject: Re: [R-SIG-Finance] Return.rebalancing contemporaneous calculation

On 10/08/2014 03:24 PM, Charles Duranceau wrote:
> Hi,
> I'm working with "PerformanceAnalytics" for calculating portfolio returns using the function Return.rebalancing. I don't understand why the results - portfolio returns - are lagged by 1 period when compared to Return.portfolio (assuming weight are time invariant).
>
> I read the definition that explain the rebalancing is taken place in the next period but since the input are returns (like in  Return.portfolio) they should be consolidated on same period.
> Is there a way not losing the first input?
>
> Here few lines to illustrate my question
>
> pfmf2003<-Return.rebalancing(mfr2003,wghts1)
> pfstat<-Return.portfolio(mfr2003,c(1,0))
> ** wghts1 = 1 for the period
>
> Results
>                          portfolio.Rebal       portfolio.returns.
> 2003-05-31      0.0087336245         0.203679369
> 2003-06-30      0.1093073593         0.008733624
> 2003-07-31     -0.0351219512         0.109307359
> 2003-08-31     -0.0404448938        -0.035121951
> 2003-09-30     -0.0063224447        -0.040444894

Return.portfolio and Return.rebalancing are the same function in current CRAN version, and have been in the R-Forge version for quite a while.

Can you give us your sessionInfo, and a fully reproducible example?

Brian

--
Brian G. Peterson
http://braverock.com/brian/
Ph: 773-459-4973
IM: bgpbraverock

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