[R-SIG-Finance] comparing solve.pq and nloptr for min variance portfolio

Alec Schmidt aschmid1 at stevens.edu
Fri Mar 18 14:56:49 CET 2016

I'm puzzled that I cannot reproduce results for asset weights using solve.pq and nloptr even in the case of just three assets.  E.g. if I use NLOPT_LD_SLSQP and start with initial weights of 1/3, I may obtain (0.47, 0, 0.53) vs (0.52, 0, 0.47).  If I start with  (0.52, 0, 0.47), I do get  (0.52, 0, 0.47)...

When I use NLOPT_GN_ISRES or other nloptr solvers that permit equality constraint sum(weights)=1 with initial weights of 1/3, I obtain (almost) the same initial weights after 20000 iterations with xtol_rel=1.0e-8...

I remember from my MC simulations of protein structures (20 years ago) that sampling is key due to multiple local minimums  but is it so bad for a simple portfolio?

I'll greatly appreciate relevant comments.


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