Returns used to compute the alpha and the beta
Good morning,
Brian G. Peterson wrote:
Classic CAPM alpha will not change based on the periodicity, as it measures the _portion_ of a set of returns that are not attributable to the benchmark return, and should be calculated with the highest regular periodicity available. Return.excess may calculate what you are referring to as "alpha" if by alpha you mean returns over a benchmark return, in which case you would first run Return.excess using the benchmark return as the parameter 'rf' and then cumulate your daily log returns to get a cumulative return over some other periodicity (annual in your query).
If I look at the Jengsen alpha d?finition, it is a linear combination of return. Therefore it is a return. Therefore the daily Jengsen alpha is not equivalent as the yearly Jengsen alpha. Am I right? If not, what I am missing? What you are explaining to me is that The alpha is not the jengsen alpha because it "measures the _portion_ of a set of returns". By portion, you mean that it is a ratio of returns and not an absolute return. Am I right? Thanks in advance for your answer.