portrand

Randomized portfolio risks, returns, and weights

Syntax

[PortRisk,PortReturn,PortWts] = portrand(Asset)

[PortRisk,PortReturn,PortWts] = portrand(___,Return,Points,Method)

portrand(Asset,Return,Points,Method)

Description

[PortRisk,PortReturn,PortWts] = portrand(Asset) returns the risks, rates of return, and weights of random portfolio configurations. Portfolios are selected at random from a set of portfolios such that portfolio weights are nonnegative and sum to 1. The sample mean and covariance of asset returns are used to compute portfolio returns for each random portfolio.

Note

An alternative for portfolio optimization is to use the Portfolio object 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.

[PortRisk,PortReturn,PortWts] = portrand(___,Return,Points,Method) returns the risks, rates of return, and weights of random portfolio configurations using optional arguments.

portrand(Asset,Return,Points,Method) plots the points representing each portfolio configuration. It does not return any data to the MATLAB^® workspace.

Input Arguments

Asset — Financial time series data

matrix

Financial time series data, specified as a matrix where each row is an observation and each column represents a single security.

Data Types: double

Return — Rate of return for corresponding security in Asset

Return computed by taking average value of each column of Asset (default) | row vector

(Optional) Rate of return for corresponding security in Asset, specified as a row vector,where each column represents the rate of return for the corresponding security.

Data Types: double

Points — Defines number of random points generated

1000 (default) | numeric

(Optional) Defines number of random points generated, specified as a numeric.

Data Types: double

Method — Method to generate random portfolios from set of portfolios

'uniform' (default) | character vector with value 'uniform' or 'geometric'

(Optional) Method to generate random portfolios from set of portfolios, specified as a character vector for one of the following:

• 'uniform' — Portfolio weights are generated that are uniformly distributed on the set of portfolio weights.

• 'geometric' — Portfolio weights are generated that are concentrated around the geometric center of the set of portfolio weights.

Note

The 'uniform' and 'geometric' methods generate weights that are distributed symmetrically around the geometric center of the set of weights.

Data Types: double

Output Arguments

PortRisk — Portfolio risk

vector

Portfolio risk, returned as a POINTS-by-1 vector of standard deviations.

PortReturn — Portfolio return

vector

Portfolio return, returned as a POINTS-by-1 vector of expected rates of return.

PortWts — Portfolio asset weights

matrix

Portfolio asset weights, returned as a POINTS-by-(number of securities) matrix of asset weights. Each row of PortWts is a different portfolio configuration.

References

[1] Bodie, Kane, and Marcus. Investments. Chapter 7.

Version History

Introduced before R2006a