[R-SIG-Finance] fPortfolio - Maximum Return Portfolio

[Yaakov Moser]

I tried reversing the sign by redefining a maxriskPortfolio function 
based on the minriskPortfolio as you suggested.

I changed the one line to be:

targetRisk = -ans$objective


The function ran - and found something close to the maxriskPortfolio, 
but it is not the end of the efficient frontier...

My constraints were long-only, so it should have been 100% in one asset, 
but it turned out to be 99.54% only, with the rest elsewhere.


Any suggestions?


See sample program below.


Thanks


Yaakov


library(fPortfolio)
Data=SMALLCAP.RET
Data=Data[,c(1:3)]
Spec=portfolioSpec()
constraints="long-only"
maxriskPortfolio <- function (data, spec = portfolioSpec(), constraints 
= "LongOnly")
{
    Data = portfolioData(data, spec)
    data <- getSeries(Data)
    targetRiskFun <- function(x, data, spec, constraints) {
        setTargetReturn(spec) = x[1]
        Solver = match.fun(getSolver(spec))
        ans = Solver(data, spec, constraints)
        targetRisk = -ans$objective
        attr(targetRisk, "weights") <- ans$weights
        attr(targetRisk, "status") <- ans$status
        return(targetRisk)
    }
    portfolio <- optimize(targetRiskFun, interval = range(getMu(Data)),
        data = Data, spec = spec, constraints = constraints)
    STATUS = attr(portfolio$objective, "status")
    if (STATUS != 0) {
        cat("\nExecution stopped:")
        cat("\n  The minimum risk portfolio could not be computed.")
        cat("\nPossible Reason:")
        cat("\n  Your portfolio constraints may be too restrictive.")
        cat("\nStatus Information:")
        cat("\n  status=", STATUS, " from solver ", getSolver(spec),
            ".", sep = "")
        cat("\n")
        stop(call. = FALSE, show.error.messages = "\n  returned from 
Rmetrics")
    }
    setWeights(spec) <- attr(portfolio$objective, "weights")
    setStatus(spec) <- attr(portfolio$objective, "status")
    portfolio = feasiblePortfolio(data, spec, constraints)
    portfolio at call = match.call()
    portfolio at title = "Maximum Risk Portfolio"
    portfolio
}
minriskPortfolio(Data,Spec,constraints)
maxriskPortfolio(Data,Spec,constraints)
portfolioFrontier(Data,Spec,constraints)





-------- Original Message --------
Subject: Re: [R-SIG-Finance] fPortfolio - Maximum Return Portfolio
From: Diethelm Wuertz <wuertz at itp.phys.ethz.ch>
To: Yaakov Moser <ymoser at gmail.com>
CC: r-sig-finance at stat.math.ethz.ch
Date: 27 May 2009 10:05:42

> Yaakov Moser wrote:
>
> There may be a faster solution (compared to my previous email), just 
> look for the portfolio with the highest risk, i.e. the lowest negative 
> risk. That can be easily implemented
> by reversion of the sign of the objective risk function in the 
> portfolio optimization.
>> Can anyone suggest a simple way to find the maximum return portfolio 
>> on an efficient frontier with fPortfolio?
>>
>> Without constraints, this is simply the asset with the highest return.
>> However, with constraints, it needs to be solved.
>>
>> The only option I have come up with so far is to use the 
>> portfolioFrontier function (ideally with a large number of points), 
>> and then take the end one.
>> However, this point varies depending on how many points were selected 
>> in the Spec...
>>
>> As far as I can tell, there is no built in functionality equivalent 
>> to the minriskPortfolio.
>>
>> Thanks
>>
>> Yaakov
>>
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>
>