[R-SIG-Finance] Portfolio Composition Forecasting

Brian G. Peterson br|@n @end|ng |rom br@verock@com
Sun Mar 1 00:41:02 CET 2020

On Sat, 2020-02-29 at 09:06 -0500, G Mac wrote:
> Is there an R-package (or other software) that can be used to
> forecast the next period's portfolio composition?  There are many
> portfolio optimization packages, but this is not the same
> question.  Say I take the past* x* periods, each period holds the
> percentage composition of an investment portfolio (sums to 1); the
> composition of assets will contain key assets held (or
> increased/decreased) through periods, but new assets will be
> added to the portfolio over time, while some holdings will be
> dropped, so we will have nuisance here.  I would like to model the
> past* x* periods, accept this mentioned error, and forecast or
> simulate for* x+1* period.
> Does anyone have any experience with this, or have any pointers
> within the broader domain of statistics?

Itr seems to me tomorrows portfolio is the same as today's portfolio
except for organic change in weights caused by market price
fluctuations, or by a rebalancing event.  The 'forecast' is the
standard naive forecast: today's portfolio will still be held tomorrow,
unless you rebalance.

I don't see any value in a simulation from the prior holdings. 
Portfolios are rebalanced for some business reason, and those reasons
are usually pretty well understood, and not the result of a random draw
from some distribution of prior holdings.

What am I missing?



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