[R-SIG-Finance] portfolioMarkowitz function
Diethelm Wuertz
wuertz at itp.phys.ethz.ch
Thu Nov 23 16:56:28 CET 2006
Deb Midya wrote:
>Hi!,
>
> Thanks in advance.
>
> I am using the example function provided in the library fPortfolio.
>
> The example is:
>
> library(fPortfolio)
>
> ## SOURCE("fPortfolio.B2-MarkowitzPortfolio")
> ## Not run:
> ## berndtInvest -
> data(berndtInvest)
> # Exclude Date, Market and Interest Rate columns from data frame,
> # then multiply by 100 for percentual returns ...
> berndtAssets = berndtInvest[, -c(1, 11, 18)]
> rownames(berndtAssets) = berndtInvest[, 1]
> head(berndtAssets)
>
> ## portfolioMarkowitz -
> myPortfolio = portfolioMarkowitz(x = berndtAssets, targetReturn = 20/100/12)
>
> I need to clarify the followings:
>
> 1. targetReturn = 20/100/12
>
>
targetReturn = 0.0167
20 devided by 100 devided by 12
>
> I could not follow the format used for targetReturn. How can I explain the values 20, 100 and 12?
>
> 2. What is the objective function?
>
Mean-variance Portfolio Problem ...
>and
>
> 3. What are the constraints?
>
>
no short selling bigger than 0 smaller than 1 for each asset ....
>
> I am looking forward for your response.
>
> Regards,
>
> Debabrata (Deb)
>
>
The result:
Title:
Mean-Variance Portfolio Optimization
Call:
portfolioMarkowitz(x = berndtAssets, targetReturn = 20/100/12)
Portfolio Weights:
2 5 7 9 10 13 14
0.53 0.03 0.15 0.08 0.08 0.02 0.12
Sum of Weights:
[1] 1
Target Return(s):
[1] 0.0167
Target Risk(s):
[,1]
[1,] 0.037
Description:
[1] "Thu Nov 23 16:49:18 2006"
The solution is for the Mean-Variance Portfolio optimization problem
according
to Markowitz, short selling forbidden. The target return is just
20/100/12 = 0.0167.
The investment in asset No 2 is 53%, in asset no 7 15% and so on.
Diethelm Wuertz
>
>
>
>---------------------------------
>
> [[alternative HTML version deleted]]
>
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