The Question is Complete .. Please dont Flag it as Need More Info An investor ha

Question

The Question is Complete .. Please dont Flag it as Need More Info

An investor has $100000 to invest in 6 different stocks. Let S_1, S_2, ..., S_6 be the (random) variables representing the annual return on $1 invested in the i^th stock (i.e. ifS_1 =0.12, $1 invested in stock i at the beginning of the year is worth $1.12 at the end of the year). You are given the following information: Then: - determine the expected value and the variance for each stock S_i - determine the covariance matrix - formulate a mean-variance portfolio model and solve it using a goal programming model in Lingo or Matlab

Explanation / Answer

Portfolio object for mean-variance portfolio optimization

collapse all in page

Use the Portfolio function to create a Portfolio object for mean-variance portfolio optimization. For more information, see Portfolio.

You can use the Portfolio function in several ways. To set up a portfolio optimization problem in a Portfolio object, the simplest syntax is:

This syntax creates a Portfolio object, p, such that all object properties are empty.

The Portfolio function also accepts collections of argument name-value pair arguments for properties and their values. The Portfolio function accepts inputs for properties with the general syntax:

If a Portfolio object exists, the syntax permits the first (and only the first argument) of the Portfolio function to be an existing object with subsequent argument name-value pair arguments for properties to be added or modified. For example, given an existing Portfolio object in p, the general syntax is:

Input argument names are not case-sensitive, but must be completely specified. In addition, several properties can be specified with alternative argument names (see Shortcuts for Property Names). The Portfolio function tries to detect problem dimensions from the inputs and, once set, subsequent inputs can undergo various scalar or matrix expansion operations that simplify the overall process to formulate a problem. In addition, a Portfolio object is a value object so that, given portfolio p, the following code creates two objects, pand q, that are distinct:

After creating a Portfolio object, you can use the associated object functions to set portfolio constraints, analyze the efficient frontier, and validate the portfolio model.

For details on this workflow, see Portfolio Object Workflow and for more detailed information on the theoretical basis for mean-variance optimization, see Portfolio Optimization Theory.

Syntax

p = Portfolio

p = Portfolio(Name,Value)

p = Portfolio(p,Name,Value

You can use the Portfolio function directly set up a "standard" portfolio optimization problem, given a mean and covariance of asset returns in the variables m and C.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.