portPossCurve: Plot the portfolio possibilities curve

Description

Plot the portfolio possibilities curve or the efficient frontier for models that permit short-selling.

Usage

portPossCurve(model, riskRange = 2, detail = 100, effFrontier = FALSE, add = FALSE, type = "l", xlab = "Risk", ylab = "Expected Return", doNotPlot = FALSE, ...)

Arguments

model

An object of class "stockModel".

riskRange

A parameter to specify how much of the portfolio possibilities curve to plot. If X is the portfolio with minimum risk without respect to the risk free rate, then the portfolio possibilities curve will be shown up to approximately the risk riskRange*X.

detail

The number of points to include on the portfolio possibilities curve. A small number will result a curve that is evidently made up of lines while a large number will provide more detail but takes more memory. The default value is generally adequate.

effFrontier

If TRUE, only the efficient frontier is drawn.

add

If TRUE, the curve is added to a plot. Otherwise a new plot is created.

type

Plotting method. "p" for points, "l" for lines, "b" for both lines and points, and "n" to produce no points or lines.

xlab

Label for the x axis. Only applied if add=FALSE.

ylab

Label for the y axis. Only applied if add=FALSE.

doNotPlot

If FALSE, nothing is plotted. This option may be useful if the points along the curve are of interest and only the values returned by portPossCurve are of interest.

...

If add=FALSE, additional arguments for plot.If add=TRUE, additional arguments for points.

Value

R: The returns of points along the curve.
risk: The risk of points along the curve.
ports: The portfolios corresponding to R and risk.

Details

If the curve is not smooth, first try decreasing the riskRange. If this is unsuccessful in producing a plot to the detail desired, increase the detail. Generally it is advisable to attempt to adjust the riskRange before adjusting detail.

Examples

Run this code

data(stock94)
sm <- stockModel(stock94, model='SIM', index=25)
portPossCurve(sm, 2)
portCloud(sm, 2.5)