Hello Mr. Bernake…

[This article was first published on Adventures in Statistical Computing, and kindly contributed to R-bloggers]. (You can report issue about the content on this page here)
Want to share your content on R-bloggers? click here if you have a blog, or here if you don't.

I was playing around tonight and came across something that looked odd.  Using the importSeries() created before, I grabbed dividend adjusted returns for SHY, IEF, and TLT (iShares Short, Medium, and Long Maturity Treasury ETFs respectively).  I was looking at efficient frontiers (more on that later) and saw that the IEF was very dominant.

from = “2001-01-01”
to = “2011-12-09”

tlt = importSeries(“tlt”,from,to)
shy = importSeries(“shy”,from,to)
ief = importSeries(“ief”,from,to)

merged = merge(tlt,shy)
merged = merge(merged,ief)

vars = c(“tlt.Return”,”shy.Return”,”ief.Return”)


> table.AnnualizedReturns(merged[,vars],Rf=mean(merged[,”shy.Return”],na.rm=TRUE))
Annualized Return0.07210.02840.0628
Annualized Std Dev0.14030.01730.0740
Annualized Sharpe (Rf=2.81%)0.3018-0.00870.4497
It struck me as odd that the IEF was so dominant with an annualized return of about 1% below TLT, but half the risk giving it a 50% increase in the Sharpe Ratio.  Then it hit me.  “Oh yeah, the QE programs were aimed at the middle of the yield curve.”

Note to self, next time QE rolls around, play the IEF…

To leave a comment for the author, please follow the link and comment on their blog: Adventures in Statistical Computing.

R-bloggers.com offers daily e-mail updates about R news and tutorials about learning R and many other topics. Click here if you're looking to post or find an R/data-science job.
Want to share your content on R-bloggers? click here if you have a blog, or here if you don't.

Never miss an update!
Subscribe to R-bloggers to receive
e-mails with the latest R posts.
(You will not see this message again.)

Click here to close (This popup will not appear again)