CODEWITHSUNDEEP
r
MichiZH
MichiZH

Reputation: 5807

R: Cumulative return, what is the correct way?

MyVector<-c(0.5, 0.3, -0.2)
Result1<-Return.cumulative(MyVector)
Result2<-exp(cumsum(MyVector))

I want to basically plot Result2 and show in a summary the value of Result1. But as far as I thought, the last entry of Result2 * MyVector[1] should be the same as the value of Result1 isn't it? Because it is a cumulative return...or at least that's what I want. Where is my mistake?

I want to basically plot a investment return and show the total return in a table. And I always index the investment vehicle to 1 so I thought the last data point of the plot should be the exact same value as the total return in the table...

EDIT:

Return.cumulative:

function (R, geometric = TRUE) 
{
  if (is.vector(R)) {
    R = na.omit(R)
    if (!geometric) 
      return(sum(R))
    else {
      return(prod(1 + R) - 1)
    }
  }
  else {
    R = checkData(R, method = "matrix")
    result = apply(R, 2, Return.cumulative, geometric = geometric)
    dim(result) = c(1, NCOL(R))
    colnames(result) = colnames(R)
    rownames(result) = "Cumulative Return"
    return(result)
  }
}

Upvotes: 0

Views: 8140

Answers (1)

G. Grothendieck
G. Grothendieck

Reputation: 269526

This:

prod(1+MyVector) - 1
## [1] 0.56

gives the same answer as:

library(PerformanceAnalytics)
Return.cumulative(MyVector)
## [1] 0.56

Please make all code posted to SO reproducible and self-contained. That includes all necessary library stateemnts. It is not necesasry to copy and post the source code from packages you are using.

Upvotes: 5

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