[R-SIG-Finance] Value of liquidity

[markleeds at verizon.net]

  hi: i can't answer your questions below but Markovwtz-Van Dijk  ( 
spelling on Van Djil may be incorrect ) came up with some heuristic a 
few years back for balancing the cost of rebalancing versus the expected 
gain in return  from rebalancing. mark kritzman ( state street ) has a 
powerpoint presentation that gives an overview of the idea ( that's on 
the net. i can find it , if you can't ) but I don't know the title of 
the original paper nor the journal it's in, assuming it was published 
somewhere. if you find it, can you let me know where it is. thanks.








On Thu, Oct 16, 2008 at 10:16 AM, Chiquoine, Ben wrote:

> Hi,
>
>
> I am trying to come up with a value for liquidity where I define
> liquidity as the ability to rebalance your portfolio.  My thought at 
> how
> to do this is to start with a set of assets.  Given their expected
> returns, volatilities, and correlations I will pick an efficient
> portfolio.  I will then run a Monte-Carlo simulation using the 
> efficient
> weights, expected returns, vols, and correlations to look at the
> expected distribution of returns.  I will compare this to the return
> distribution from a Monte-Carlo simulation in which my I rebalance my
> portfolio to the efficient weights every year.  Eventually I'd like to
> allow or disallow rebalancing to a select subset of the assets in the
> portfolio (say private equity and absolute return) while rebalancing 
> to
> optimal weights (as much as possible) the remaining assets.  I'm 
> really
> new to Monte-Carlo simulation so my question has three parts.  First, 
> is
> this idea completely crazy?  Second, is their a preexisting R package
> that is designed to be used for portfolio asset allocation?  Third, if
> no package exists to do this what is the data generating process I
> should use to model portfolio returns for a portfolio with multiple,
> correlated, underlying assets?   I hope this is the right forum for 
> this
> and that a similar issue had not already been addressed.  Thanks in
> advance for any suggestions you can provide.
>
>
> Ben
>
>
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