[R-SIG-Finance] Portfolio Composition Forecasting

[Adam Ginensky]

I have a very similar view to Brian.  I also think of weights as something
that is a deterministic function of the actual prices that have been
realized.  So if one forecasts tomorrows prices, forecasting tomorrows
weights would follow.  What am I missing ?

On Sat, Feb 29, 2020 at 5:41 PM Brian G. Peterson <brian using braverock.com>
wrote:

> 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?
>
> Regards,
>
> Brian
>
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