maxDrawdown function from Performance Analytics giving incorrect values

Question

I call the maxDrawdown function of the package PerformanceAnalytics on a column of daily returns. when I calculate the cumulative returns of the column and I make a plot, it looks like this. When I calculate the max of the cumulative returns, I find the value 0.09196466. Its apparent from the graph that the worst Drawdown should be bigger that that value. When I call the aforementioned function it returns the value 0.084658. Why is that discrepancy happening? Noted that when I call the function I do not use cumulative returns, but normal daily returns from an xts object.

Answer 1

Most likely it is due to the geometric argument in the maxDrawdown function. See:

library(PerformanceAnalytics)
library(xts)

x <- xts(c(-0.1, -0.1, -0.1),
         order.by = seq.Date(from = Sys.Date(), length.out = 3, by = "days"))


> maxDrawdown(x)
[1] 0.271
> maxDrawdown(x, geometric = FALSE)
[1] 0.3