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  3. Intermediate Portfolio Analysis in R

Exercise

Do improved estimates lead to improved performance?

Let us hypothesize that using a robust estimate of the variance-covariance matrix will outperform the sample variance covariance matrix. In theory, better estimates should lead to better results. We will use the moments_robust() function that was defined in chapter 3 and the portfolio specification from the last exercise.

Instructions

100 XP
  • Run the optimization using the moments_robust() function to estimate moments. The optimization backtest will use the same parameters used previously, quarterly rebalancing with training period and rolling window to use 5 years of data. Assign the results to a variable named opt_rebal_rb_robust.
  • Chart the weights.
  • Chart the component percentage contribution to risk.
  • Compute the portfolio returns using Return.portfolio(). Assign the returns to a variable named returns_rb_robust.