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Multi-Group Model

The document describes using an R library to analyze stock returns for multiple groups from 1999-2004. It creates a multi-group model (MGM) allowing short sales and no risk-free rate, identifies the optimal portfolio, and plots it along with the portfolio possibilities curve. The optimal portfolio has an expected return of 0.0235 and risk of 0.0386, allocating amounts to 16 different stocks across industries.

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130 views

Multi-Group Model

The document describes using an R library to analyze stock returns for multiple groups from 1999-2004. It creates a multi-group model (MGM) allowing short sales and no risk-free rate, identifies the optimal portfolio, and plots it along with the portfolio possibilities curve. The optimal portfolio has an expected return of 0.0235 and risk of 0.0386, allocating amounts to 16 different stocks across industries.

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api-285777244
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Multi-group Model

YIK LUN, KEI


[email protected]
library(stockPortfolio)
ticker <-

c("C", "KEY", "WFC", "SO", "DUK","D","HE", "EIX" ,"AMGN","GILD","CELG","BIIB","IMO",


"MRO","YPF","^GSPC")
#Industries:
ind <- c("Money Center Banks", "Money Center Banks", "Money Center Banks",
"Electrical Utilities", "Electrical Utilities", "Electrical Utilities",
"Electrical Utilities", "Electrical Utilities", "Biotechnology", "Biotechnology",
"Biotechnology", "Biotechnology", "Fuel Refining", "Fuel Refining",
"Fuel Refining", "Index")
gr1 <- getReturns(ticker, start='1999-12-31', end='2004-12-31')
#Multi group model (short sales, Rf=0):
mc <- stockModel(gr1, model='MGM', drop=16, industry=ind, shortSelling =T)
#identify the optimal portfolio for multi group model#
opmc <- optimalPort(mc)
#Plot the optimal portfolio and the stocks:
plot(opmc)
#Add the portfolio possibilities curve:
portPossCurve(mc, add=TRUE, riskRange=5)

0.00

0.01

0.02

Return

0.03

0.04

Risk and Return of Stocks

0.05

0.10

0.15

0.20

0.25

Risk
opmc
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Model: multigroup model


Expected return: 0.02352588
Risk estimate:
0.03861769
Portfolio allocation:
C
KEY
WFC
-0.03089228 0.07541026 0.08379669
HE
EIX
AMGN
0.34260857 -0.06738994 -0.05173633
IMO
MRO
YPF
0.33206815 -0.01351500 -0.01593109

SO
DUK
0.20759892 -0.09766541
GILD
CELG
0.09659984 0.02280299

D
0.08609299
BIIB
0.03015163

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