[R-SIG-Finance] Adding transaction fees to Return.portfolio

Ilya Kipnis ilya.kipnis at gmail.com
Tue May 10 21:52:40 CEST 2016


There's actually a way to compute turnover with Return.portfolio, with
verbose = TRUE. It returns end of period weights, and beginning of period
weights, so the turnover can be computed as beginWeights - lag(endWeights).


On Tue, May 10, 2016 at 3:50 PM, Robert Wages <robert at rwages.com> wrote:

> Return.portfolio is an easy function to use to calculate the aggregate
> performance of a portfolio that is rebalanced on a regular basis or that
> has
> a custom weighting scheme on the same periodicity of returns.  I cannot
> find
> any provision in Return.portfolio, however, for incorporating the
> transaction costs for the rebalancing in the portfolio.  The resulting
> portfolio performance would  seem to be high to the extent of the
> transaction costs.
> On the other hand, running strategies in Quantstrat on individual
> securities
> (or groups of securities) allows one to take into account estimated trading
> costs to generate somewhat realistic performance estimates.  Quantstrat,
> however, does not seem to have any readily accessible functions to balance
> a
> portfolio of securities within a portfolio limit.  Previous related
> discussions seem to suggest the only solution is to write custom order
> sizing functions to include in the strategy's rules.
> I may be able to figure how to write custom functions in Quantstrat to do
> this after a lot of brain damage, or alternatively my own version of
> Return.portfolio, but I thought I should check with the community to see if
> there are any better suggestions for this.  Given that many investment
> strategies rely on portfolio rebalancing under some set of rules, as
> opposed
> to buying and selling individual securities on the basis of rules, I would
> be surprised if I were the first person to wonder about this.
> Robert C Wages
> USA Mobile: +1 717 618 2828
> robert at rwages.com <mailto:robert at rwages.com>
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