Numerical Solution for the Minimum Semivariance Portfolio Optimization Problem in R: The Semicov Package
4 Pages Posted: 15 Apr 2020
Date Written: March 21, 2020
Exact analytical solutions to the problem of computing a minimum semivariance portfolio cannot be obtained due to the endogeneity of the semicovariance matrix. However, when the number of assets is small, the weights for such a portfolio can be determined numerically. This paper presents the R package semicov, which provides a function that implements a numerical algorithm to minimize the semivariance of a portfolio with up to five assets. A function that estimates the approximation of the semicovariance matrix as in Estrada (2008) is also included in the package.
Keywords: semivariance, numerical solution, portfolio optimization
JEL Classification: C65, G11
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