r0Strategy: Computes the relative loss of the target portfolio used

In DOSPortfolio: Dynamic Optimal Shrinkage Portfolio

Description

The function computes the initial value of the relative loss in the variance of the target portfolio as given in Eq. (2.10) of \insertCiteBODNAR21dynshrink;textualDOSPortfolio.

Usage

r0Strategy(data, target_portfolio, c)

Arguments

data	an n by p matrix of asset returns. Columns represent different assets rows are observations, where n>p, containing, for instance, log-returns.
target_portfolio	a vector which determines the weights of the target portfolio used when the shrinkage estimator of the global minimum variance portfolio is constructed for the first time.
c	a numeric which is the concentration ratio.

Value

vector

References

\insertAllCited

Examples

n <- 200*2
p <- 80
data <- 5/3 * matrix(rt(n*p, df=5), ncol=p, nrow=n)
# set a target portfolio, such as equally weighted
b <- rep(1,p)/p
r0Strategy(data, b, p/n)

DOSPortfolio documentation built on Sept. 13, 2021, 9:09 a.m.