portfolioMarkowitz function
Deb Midya wrote:
Hi!,
Thanks in advance.
I am using the example function provided in the library fPortfolio.
The example is:
library(fPortfolio)
## SOURCE("fPortfolio.B2-MarkowitzPortfolio")
## Not run:
## berndtInvest -
data(berndtInvest)
# Exclude Date, Market and Interest Rate columns from data frame,
# then multiply by 100 for percentual returns ...
berndtAssets = berndtInvest[, -c(1, 11, 18)]
rownames(berndtAssets) = berndtInvest[, 1]
head(berndtAssets)
## portfolioMarkowitz -
myPortfolio = portfolioMarkowitz(x = berndtAssets, targetReturn = 20/100/12)
I need to clarify the followings:
1. targetReturn = 20/100/12
targetReturn = 0.0167 20 devided by 100 devided by 12
I could not follow the format used for targetReturn. How can I explain the values 20, 100 and 12? 2. What is the objective function?
Mean-variance Portfolio Problem ...
and 3. What are the constraints?
no short selling bigger than 0 smaller than 1 for each asset ....
I am looking forward for your response. Regards, Debabrata (Deb)
The result:
Title:
Mean-Variance Portfolio Optimization
Call:
portfolioMarkowitz(x = berndtAssets, targetReturn = 20/100/12)
Portfolio Weights:
2 5 7 9 10 13 14
0.53 0.03 0.15 0.08 0.08 0.02 0.12
Sum of Weights:
[1] 1
Target Return(s):
[1] 0.0167
Target Risk(s):
[,1]
[1,] 0.037
Description:
[1] "Thu Nov 23 16:49:18 2006"
The solution is for the Mean-Variance Portfolio optimization problem
according
to Markowitz, short selling forbidden. The target return is just
20/100/12 = 0.0167.
The investment in asset No 2 is 53%, in asset no 7 15% and so on.
Diethelm Wuertz
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