portfolio optimization questions
Alexander Moreno wrote:
Hi, I have a general finance question, rather than an R-specific question. In trading currencies, should the weights always add up to 1, or 0, or can they add up to anything? What determines this?
If you have no leverage (long-only), and are fully invested, then your weighting vector will add to 1. If you are 1:1 long/short, then your weighting vector would add to 0, if you are 50% levered long-only, then you would have a weighting vector total of 1.5, and so on. Make sense?
Also, I have an Splus nuopt
question. If anyone knows a better place to post this, it would be
appreciated, but in the meantime I'll ask it here. In NuOPT, when I set
mu.target for solveQP to be very low (used as in page 9 of introduction to
modern portfolio optimization with NuOPT, S-PLUS, and S+Bayes), I see poor
portfolio returns, but if I set it to be high, I get an error message
<<SIMPLE 193>> Error in solve():
<<NUOPT 2>> infeasible(linear constraints and variable bounds)
This most likely means that there is no portfolio with the target mu. Regards, - Brian