drawFigure: Efficient frontier and return distribution figures

Description Usage Arguments Details Value Author(s) References See Also Examples

View source: R/drawFigure.R

Description

Plots the efficient frontiers of risky investments and all investments. The optimum points corresponding to the risk aversion coefficient are indicated by dots. Further, the function plots a predictive return distribution figure.

Usage

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drawFigure(symbol, yield, vol, beta, r = 1, 
  total = 1, indexVol = 20, nStocks = 7, balanceInt = 12, A = 10, 
  riskfree = FALSE, bor = FALSE)

Arguments

symbol

character vector of the symbols of the risky investments

yield

vector of yields (%)

vol

vector of volatilities (%)

beta

vector of betas (%)

r

risk-free interest rate (%)

total

total investment (for example in euros)

indexVol

volatility of market portfolio (%)

nStocks

number of risky investments in the portfolio

balanceInt

balancing interval of the portfolio in months

A

risk aversion coefficient (see details)

riskfree

is risk-free investment included in the portfolio (logical)

bor

is borrowing (negative risk-free investment) allowed (logical)

Details

The function uses the single-index model and Markovitz portfolio optimization model to find the optimum risky portfolio. The returns are assumed to be log-normally distributed. The maximized function is mu - 0.5*A*var where mu is expected return, A is risk aversion coefficient, and var is return variance.

Value

portfolio

allocation of the total investment (in euros)

returnExpectation

expected portfolio return

returnDeviation

standard deviation of the portfolio

Author(s)

Arto Luoma <arto.luoma@wippies.com>

References

Bodie, Kane, and Marcus (2014) Investments, 10th Global Edition, McGraw-Hill Education, (see Section 7.4 The Markowitz Portfolio Optimization Model and Section 8.2 The Single-Index Model).

See Also

portfOptim

Examples

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data(stockData, package="RcmdrPlugin.RiskDemo")
with(stockData,drawFigure(symbol=rownames(stockData),yield=divYield,
  vol=vol,beta=beta,r=1,total=100,indexVol=10, 
  nStocks=5,balanceInt=12,A=10,riskfree=TRUE,bor=FALSE))

arolluom/RcmdrPlugin.RiskDemo documentation built on May 8, 2019, 9:58 p.m.