r0Strategy {DOSPortfolio} | R Documentation |
The function computes the initial value of the relative loss in the variance of the target portfolio as given in Eq. (2.10) of Bodnar et al. (2021).
r0Strategy(data, target_portfolio, c)
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. |
vector
Bodnar T, Parolya N, Thorsén E (2021). “Dynamic Shrinkage Estimation of the High-Dimensional Minimum-Variance Portfolio.” arXiv preprint arXiv:2106.02131. https://arxiv.org/abs/2106.02131.
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)