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

[Diethelm Wuertz]

Yaakov Moser wrote:

This works


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)
       # DW:
       # Take care that the status ans$status is always 0
       #  If the solver fails set the value of the risk to the global
       #    min risk portfolio!
       # Use the function try() that the calculation does not break!
       targetRisk = -ans$objective
       attr(targetRisk, "weights") <- ans$weights
       attr(targetRisk, "status") <- ans$status
       return(targetRisk)
   }
  
   # DW:
   # Take care that the interval range may be large enough if short selling
   # is allowed, that requires an adaption of the range!
   # DW:
   # Increase the tolerance to be sure that optimize has converged!
   portfolio <- optimize(targetRiskFun, interval = range(getMu(Data)),
       data = Data, spec = spec, constraints = constraints,
       tol = .Machine$double.eps^0.5)
     
   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
}

maxriskPortfolio(SMALLCAP.RET[, 1:3])


-d
> 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
>>>
>>> _______________________________________________
>>> R-SIG-Finance at stat.math.ethz.ch mailing list
>>> https://stat.ethz.ch/mailman/listinfo/r-sig-finance
>>> -- Subscriber-posting only.
>>> -- If you want to post, subscribe first.
>>>
>>
>>
>