Portfolio Construction Examples


The efficient frontier computation functions require information about each asset in the portfolio. This data is entered into the function via two matrices: an expected return vector and a covariance matrix. The expected return vector contains the average expected return for each asset in the portfolio. The covariance matrix is a square matrix representing the interrelationships between pairs of assets. This information can be directly specified or can be estimated from an asset return time series with the function ewstats.

    Note:   An alternative to using these portfolio optimization functions is to use the Portfolio object (Portfolio) for mean-variance portfolio optimization. This object supports gross or net portfolio returns as the return proxy, the variance of portfolio returns as the risk proxy, and a portfolio set that is any combination of the specified constraints to form a portfolio set. For information on the workflow when using Portfolio objects, see Portfolio Object Workflow.

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