divRatio: Diversification Ratio

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

View source: R/divRatio.R

Description

Compute the diversification ratio of a portfolio.

Usage

1

Arguments

w

numeric: a vector of weights

var

numeric matrix: the variance–covariance matrix

Details

The function provides an efficient implementation of the diversification ratio, suitable for optimisation.

Value

a numeric vector of length one

Author(s)

Enrico Schumann

References

Yves Choueifaty and Yves Coignard (2008) Toward Maximum Diversification. Journal of Portfolio Management 35(1), 40–51.

See Also

pm, drawdown

Examples

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na  <- 10     ## number of assets
rho <- 0.5    ## correlation
v_min <- 0.2  ## minimum vol
v_max <- 0.4  ## maximum vol

## set up a covariance matrix S
C <- array(rho, dim = c(na,na))
diag(C) <- 1
vols <- seq(v_min, v_max, length.out = na)
S <- outer(vols, vols) * C

w <- rep(1/na, na)  ## weights
divRatio(w, S)

enricoschumann/NMOF documentation built on Feb. 14, 2019, 2:21 p.m.