portfolio.optim: Portfolio Optimization
Description
Computes an efficient portfolio from the given return series x
in the mean-variance sense.Usage
## S3 method for class 'default':
portfolio.optim(x, pm = mean(x), riskless = FALSE,
shorts = FALSE, rf = 0.0, ...)
Arguments
x
a numeric matrix or multivariate time series consisting of a
series of returns.
pm
the desired mean portfolio return.
riskless
a logical indicating whether there is a riskless
lending and borrowing rate.
shorts
a logical indicating whether shortsales on the risky
securities are allowed.
rf
the riskfree interest rate.
...
further arguments to be passed from or to methods.
Value
- A list containing the following components:
- pwthe portfolio weights.
- pxthe returns of the overall portfolio.
- pmthe expected portfolio return.
- psthe standared deviation of the portfolio returns.
Details
The computed portfolio has the desired expected return pm
and
no other portfolio exists, which has the same mean return, but a
smaller variance. To solve the quadratic program,
solve.QP
is used. portfolio.optim
is a generic function with methods for
multivariate "ts"
and default
for matrix.
Missing values are not allowed.
References
E. J. Elton and M. J. Gruber (1991): Modern Portfolio Theory and
Investment Analysis, 4th Edition, Wiley, NY, pp. 65-93. C. Huang and R. H. Litzenberger (1988): Foundations for
Financial Economics, Elsevier, NY, pp. 59-82.
Examples
Run this codex <- rnorm (1000)
dim(x) <- c(500,2)
res <- portfolio.optim (x)
res$pw
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