Rebalance dates via `weights` xts object does not match documentation for `Return.portfolio.arithmetic`

[jmuhlenkamp]

According to the documentation for Return.portfolio rebalance_on parameter:

Ignored [rebalance_on parameter] if weights is an xts object that specifies the rebalancing dates.

However, I observe that the behavior of the code is only consistent with this documentation for Return.portfolio(..., geometric=TRUE) NOT Return.portfolio(..., geometric=FALSE).

Specifically, for geometric=FALSE, Return.portfolio re-balances on every observation within the R asset returns argument regardless of the weights is specified with a rebalancing dates or if the rebalance_on argument is used.

Here is a simple reproducible example:

data(edhec)
data <- edhec['199701/199704', 1:2]

ret_geo <- Return.portfolio(data, rebalance_on = 'quarters', verbose = TRUE, geometric = TRUE)
ret_geo$BOP.Weight
## Note that BOP.Weight only re-sets to 50/50 on a quarterly basis
##            Convertible Arbitrage CTA Global
## 1997-01-31             0.5000000  0.5000000
## 1997-02-28             0.4933210  0.5066790
## 1997-03-31             0.4890374  0.5109626
## 1997-04-30             0.5000000  0.5000000

ret_ari <- Return.portfolio(data, rebalance_on = 'quarters', verbose = TRUE, geometric = FALSE)
ret_ari$BOP.Weight
## Note that BOP.Weight re-sets to 50/50 at EVERY OBS
##            Convertible Arbitrage CTA Global
## 1997-01-31                   0.5        0.5
## 1997-02-28                   0.5        0.5
## 1997-03-31                   0.5        0.5
## 1997-04-30                   0.5        0.5

I dug into Return.portfolio.arithmetic and it looks like the following line should be replaced:

bop_weights[k, ] = weights[i, ]

I believe it should be:

if (j == 1) {
  bop_weights[k, ] = weights[i, ]
} else {
  bop_weights[k, ] = eop_weights[k - 1, ]
}

Please let me know you think. I can open a PR to fix this if you do indeed agree it is a bug or otherwise needs an update. Thanks in advance.

[peterccarl]

@jmuhlenkamp Thanks for the reminder. Yes, please open a PR and I'll test it.