SortinoRatio      package:PerformanceAnalytics      R Documentation

_c_a_l_c_u_l_a_t_e _S_o_r_t_i_n_o _R_a_t_i_o _o_f _p_e_r_f_o_r_m_a_n_c_e _o_v_e_r _d_o_w_n_s_i_d_e _r_i_s_k

_D_e_s_c_r_i_p_t_i_o_n:

     Sortino proposed an improvement on the Sharpe Ratio to better
     account for skill and excess performance by using only downside
     semivariance as the measure of risk.

_U_s_a_g_e:

     SortinoRatio(Ra, MAR = 0)

_A_r_g_u_m_e_n_t_s:

      Ra: a vector, matrix, data frame, timeSeries or zoo object of
          asset returns 

     MAR: Minimum Acceptable Return, in the same periodicity as your
          returns 

_D_e_t_a_i_l_s:

     Sortino contends that risk should be measured in terms of not
     meeting the investment goal.  This gives rise to the notion of
     "Minimum Acceptable Return" or MAR.  All of Sortino's proposed
     measures include the MAR, and are more sensitive to downside or
     extreme risks than measures that use volatility(standard deviation
     of returns) as the measure of risk.

     Choosing the MAR carefully is very important, especially when
     comparing disparate investment choices.  If the MAR is too low, it
     will not adequately capture the risks that concern the investor,
     and if the MAR is too high, it will unfavorably portray what may
     otherwise be a sound investment.  When comparing multiple
     investments, some papers recommend using the risk free rate as the
     MAR.  Practitioners may wish to choose one MAR for consistency,
     several standardized MAR values for reporting a range of
     scenarios, or a MAR customized to the objective of the investor.


       SortinoRatio=frac{overline{(R_{a} - MAR)}}{delta_{MAR}}

     where delta_{MAR} is the 'DownsideDeviation'.

_V_a_l_u_e:

     Sortino ratio

_N_o_t_e:

_A_u_t_h_o_r(_s):

     Brian G. Peterson

_R_e_f_e_r_e_n_c_e_s:

     Sortino, F. and Price, L. Performance Measurement in a Downside
     Risk Framework. _Journal of Investing_. Fall 1994, 59-65.

_S_e_e _A_l_s_o:

     'SharpeRatio' 
      'DownsideDeviation' 
      'SemiVariance' 
      'SemiDeviation' 
      'InformationRatio'

_E_x_a_m_p_l_e_s:

     data(edhec)
     head(edhec[,6, drop = FALSE])
     SortinoRatio(edhec[, 6])

