[R-sig-finance] Long-short balanced portfolio optimization

[KAHRA HANNU]

Jeff,

See Bernd Scherer's book "Portfolio Construction and Risk Budgeting"
http://books.global-investor.com/books/20526.htm?ginPtrCode=00000&identifier=ed046b089287e2d975ea91dd0fd89aa4.

It seems that 6. Benchmark-Relative Optimization provides the answer. I have written a code for that but I do not have the code and the book with be right now.

The optimization provides the overweights and underweights wrt a benchmark portfolio such that the weights sum to zero.

Regards,

Hannu Kahra 
Progetti Speciali 
Monte Paschi Asset Management SGR S.p.A. 
Via San Vittore, 37
IT-20123 Milano, Italia 

Tel.: +39 02 43828 754 
Mobile: +39 333 876 1558 
Fax: +39 02 43828 247 
E-mail: hannu.kahra at mpsgr.it 
Web: www.mpsam.it 



-----Original Message-----
From: r-sig-finance-bounces at stat.math.ethz.ch
[mailto:r-sig-finance-bounces at stat.math.ethz.ch]On Behalf Of Jeff Enos
Sent: Friday, May 27, 2005 6:16 PM
To: r-sig-finance at stat.math.ethz.ch
Subject: [R-sig-finance] Long-short balanced portfolio optimization


R-sig-finance,

I have a vector of expected returns and a covariance matrix and would
like to perform mean-variance portfolio optimization with the
constraint that the portfolio be long-short balanced, that is,
sum(weights) == 0.

It doesn't look like portfolio.optim in the tseries package supports
this constraint -- has anyone already solved this problem somewhere
I've missed?

Thanks,

Jeff


-- 
Jeff Enos
Kane Capital Management
jeff at kanecap.com

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