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In [R] one can pass either a vector or scalar as the risk free rate. What is better? If I pass a vector to (for example) chart.riskreturnscatter then the sharpe ratio lines disappear.

chart.RiskReturnScatter(managers[,c(1,2,3)],0.01)
chart.RiskReturnScatter(managers[,c(1,2,3)],managers[,10]) 

So is this a feature?

Thanks, Raghu

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This is a feature, when you pass a vector it's because the risk free rate has changed over time. E.g. you can assume a constant or changing risk free rate as each period of returns can have an associated risk free rate.

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  • $\begingroup$ Kyle - Thanks for the response. I appreciate why one would want a varying Rf but if I pass a vector I can't get the Sharpe lines on the graph. Do Sharpe line not make sense with a varying Rf rate? $\endgroup$ – Raghu Ramachandran Jan 9 '15 at 21:21
  • $\begingroup$ Try playing the graphical parameters to ensure your lines are not out of range of the graph. $\endgroup$ – Kyle Balkissoon Jan 9 '15 at 21:44
  • $\begingroup$ In chart.RiskReturnScatter, Sharpe lines are added using abline(a = (Rf * 12), b = add.sharpe[line], col = "gray", lty = 2) } (where b = c(1,2,3)) This won't work if Rf is a vector because a has to be a scalar. $\endgroup$ – Raghu Ramachandran Jan 12 '15 at 16:30
  • $\begingroup$ # @todo: Drawing Sharpe ratio lines currently throws warnings; change test statement, from the source code, likely it's a work in progress. $\endgroup$ – Kyle Balkissoon Jan 16 '15 at 22:13

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