CAPM.beta {PerformanceAnalytics}R Documentation

calculate CAPM beta

Description

CAPM Beta is the beta of an asset to the variance and covariance of an initial portfolio. Used to determine diversification potential. also called "systematic beta" by several papers.

This function uses a linear intercept model to achieve the same results as the symbolic model used by BetaCoVariance

Usage

CAPM.beta(Ra, Rb, rf = 0, digits = 4)

Arguments

Ra a vector, matrix, data frame, timeSeries or zoo object of asset returns
Rb return vector of the benchmark asset
rf risk free rate, in same period as your returns
digits number of digits to round results to

Details

cov(Ra,Rb)/var(Ra)

Ruppert(2004) reports that this equation will give the estimated slope of the linear regression of Ra on Rb and that this slope can be used to determine the risk premium or excess expected return (see Eq. 7.9 and 7.10, p. 230-231)

Value

systematic beta of an asset to the index

Note

Author(s)

Peter Carl

References

Sharpe, W.F. Capital Asset Prices: A theory of market equilibrium under conditions of risk. Journal of finance, vol 19, 1964, 425-442.
Ruppert, David. Statistics and Finance, an Introduction. Springer. 2004.

See Also

BetaCoVariance CAPM.alpha CAPM.utils

Examples

# First we load the data
data(managers)
CAPM.beta(managers[, "HAM1", drop=FALSE], managers[, "SP500.TR", drop=FALSE], rf = managers[, "US.3m.TR", drop=FALSE])


[Package PerformanceAnalytics version 0.9.6 Index]