Call it what you want but for a simple (arithematic or geometric = FALSE) return, the equity curve should be cumprod(1+R) not cumsum(R).
C.
________________________________
De : Peter Carl
Cc : "r-sig-finance@r-project.org"
Envoyé le : Mercredi 22 août 2012 22h55
Objet : Re: [R-SIG-Finance] Bug in chart.CumReturns (PerformanceAnalytics)
The "arithmetic" and "geometric" tags (indicated as geometric=TRUE or
FALSE) are used not for the returns themselves, but the *chaining method*
used in the calculation. (I think the documentation says "simple" instead
of "arithmetic"). Part of the confusion is that the language people are
using in the literature is slightly different than what I adopted at the
beginning, and it could be changed to be more clear. Also, geometric ==
compound.
Perhaps we should use chaining.method=c("geometric", "simple") for all of
these functions in a future version. Alternatively, we could use
returns.type=c("simple", "log") and provide the transformed returns from
the "log" case, although somewhat I'm reluctant to do that across the
whole package.
pcc
--
Peter Carl
http://www.braverock.com/peter
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