[R-SIG-Finance] Sharpe's algorithm for portfolio improvement

[John P. Burkett]

Enrico Schumann wrote:

> But you can also directly use the constraint in the creation of the new
> solutions, which is what Sharpe suggested (and what works quite well, and
> not just for smooth functions/constraints): if you only add zero-sum changes
> to a feasible portfolio, it will remain feasible with respect to the budget
> constraint. If you want min/max-holding sizes, choose asset weights such
> that the min/max-constraints remain unviolated. This is straightforward in
> methods like Simulated Annealing/Threshold Accepting, but somewhat more
> difficult in 'DE'. (Which does not mean that 'DE' is not as good as the
> other methods, just that the efficient approaches possibly differ, depending
> on the method.)

Thanks, Enrico.  I'm interested in using the adding-up constraint in the 
creation of new solutions, via methods such as simulated annealing or 
threshold accepting.  I imagine that the DMOF package is useful for 
implementing that approach.  Are there also other packages that I should 
consider?

Best regards,
John

-- 
John P. Burkett
Department of Economics
University of Rhode Island
Kingston, RI 02881-0808
USA

phone (401) 874-9195