Takes a set of returns and relates them to a market benchmark in a scatterplot

Uses a scatterplot to display the relationship of a set of returns to a market benchmark. Fits a linear model and overlays the resulting model. Also overlays a Loess line for comparison.

chart.Regression(Ra, Rb, Rf = 0, excess.returns = FALSE,
  reference.grid = TRUE, main = "Title", ylab = NULL, xlab = NULL,
  xlim = NA, colorset = 1:12, symbolset = 1:12,
  element.color = "darkgray", legend.loc = NULL, ylog = FALSE,
  fit = c("loess", "linear", "conditional", "quadratic"), span = 2/3,
  degree = 1, family = c("symmetric", "gaussian"), ylim = NA,
  evaluation = 50, legend.cex = 0.8, cex = 0.8, lwd = 2, ...)

Arguments

Ra

a vector of returns to test, e.g., the asset to be examined
Rb

a matrix, data.frame, or timeSeries of benchmark(s) to test the asset against
Rf

risk free rate, in same period as the returns
excess.returns

logical; should excess returns be used?
reference.grid

if true, draws a grid aligned with the points on the x and y axes
main

set the chart title, same as in plot
ylab

set the y-axis title, same as in plot
xlab

set the x-axis title, same as in plot
xlim

set the x-axis limit, same as in plot
colorset

color palette to use
symbolset

symbols to use, see also 'pch' in plot
element.color

provides the color for drawing chart elements, such as the box lines, axis lines, etc. Default is "darkgray"
legend.loc

places a legend into one of nine locations on the chart: bottomright, bottom, bottomleft, left, topleft, top, topright, right, or center.
ylog

Not used
fit

for values of "loess", "linear", or "conditional", plots a line to fit the data. Conditional lines are drawn separately for positive and negative benchmark returns. "Quadratic" is not yet implemented.
span

passed to loess line fit, as in loess.smooth
degree

passed to loess line fit, as in loess.smooth
family

passed to loess line fit, as in loess.smooth
ylim

set the y-axis limit, same as in plot
evaluation

passed to loess line fit, as in loess.smooth
legend.cex

set the legend size
cex

set the cex size, same as in plot
lwd

set the line width for fits, same as in lines
…

any other passthru parameters to plot

References

Chapter 7 of Ruppert(2004) gives an extensive overview of CAPM, its assumptions and deficiencies.

See also

plot

Examples


data(managers)
chart.Regression(managers[, 1:2, drop = FALSE],
                managers[, 8, drop = FALSE],
                Rf = managers[, 10, drop = FALSE],
                excess.returns = TRUE, fit = c("loess", "linear"),
                legend.loc = "topleft")