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

Abstract

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

Suggested Citation

Rigamonti, Andrea, Numerical Solution for the Minimum Semivariance Portfolio Optimization Problem in R: The Semicov Package (March 21, 2020). Available at SSRN: https://ssrn.com/abstract=3558712 or http://dx.doi.org/10.2139/ssrn.3558712

Andrea Rigamonti (Contact Author)

University of Liechtenstein ( email )

Fuerst Franz Josef-Strasse
Vaduz, 9490
Liechtenstein

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