[R] Rolling optimization

[R. Michael Weylandt]

Not having played with portfolio.opim() much, I can't guarantee this
will fix it, but if it requires a matrix rather than a vector and you
are sure about the rest of the syntax, this might do the trick:

asset_forecast[i, , drop = FALSE]

This is because:

R> x = matrix(1:9, 3)
R> is.matrix(x[,1])
FALSE
R> is.matrix(x[,1,drop=FALSE])
TRUE

Michael

On Mon, Oct 10, 2011 at 9:33 PM, Darius H <xenon99 at hotmail.com> wrote:
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> Hello everyone,
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> I would like assistance with a snippet I have written to do a recursive portfolio optimization given time-varying return forecasts.
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> In my case, I have forecast the monthly returns for nearly 55 years out on 8 asset classes.
> I need to calculate the weights for the optimal (tangency) portfolio based on my monthly forecasts and an arbitrary covariance matrix
> Getting these weights have proven difficult.
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> # these are forecast (out of sample) returns; each is a 648x1 matrix
> cash_forecast2=as.ts(cash_forecast)
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> larg_forecast2=as.ts(larg_forecast)
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> valu_forecast2=as.ts(valu_forecast)
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> grow_forecast2=as.ts(grow_forecast)
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> smal_forecast2=as.ts(smal_forecast)
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> tres_forecast2=as.ts(tres_forecast)
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> cred_forecast2=as.ts(cred_forecast)
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> comm_forecast2=as.ts(comm_forecast)
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> # make a matrix of all expected returns
> # each line corresponds to forecast monthly returns for each asset class; this is a 648x8 matrix
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> asset_forecast=ts.intersect(cash_forecast2, larg_forecast2,valu_forecast2,
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> grow_forecast2, smal_forecast2, tres_forecast2, cred_forecast2, comm_forecast2)
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> # make a covariance matrix based on the entire data
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> actual_ret=cbind(cash_ret, larg_ret,valu_ret,grow_ret,smal_ret,tres_ret,cred_ret,comm_ret)
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> cov_matrix=cov(actual_ret)
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> opt_port = ts(matrix(,nrow=648,ncol=8))
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> for (i in 1:648) opt_port[i,]= portfolio.optim(asset_forecast[i,],
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> riskless=FALSE, shorts=TRUE, covmat = "cov_matrix",
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> by.column = FALSE, by=1, align="right")
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> I get the following error message; "Error in portfolio.optim.default(asset_forecast[i, ], shorts = TRUE, covmat = "cov_matrix",  :  x is not a matrix"
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> So clearly, asset_forecast[i,] is not a matrix. So I need another method to do this. Can anyone suggest a solution that would allow my to set sail in the right direction?
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> Many thanks,
> Bond, Jamesss....sorry that's my screen name... Darius :)
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