[GSoC-PortA] Random portfolios

[Ross Bennett]

The reason for fewer random portfolios being generated is due to the
leverage constraints in init.portf. There is a block of code in
randomize_portfolio_v2 (which is called by rp_sample) that will check for a
difference in min_sum and max_sum. For example, if min_sum=1 and max_sum=1,
we temporarily modify min_sum=0.99 and max_sum=1.01 so that random
portfolios can be generated.

Then in random_portfolios, there is a block of code that eliminates
portfolios that do not satisfy the constraints with the check_constraints
function. This takes place for random portfolios generated by the sample,
simplex, and grid method. Because rp_sample will generate portfolios with
weights that sum from 0.99 to 1.01, there are several portfolios that
violate leverage constraints of min_sum=1 and max_sum=1 and therefore will
be eliminated.

If you change the init.portf leverage constraints to min_sum=0.99 and
max_sum=1.01 you should generate 1000 portfolios.

I'll add some of this content to the @details in random_portfolios to
explain how the function is sensitive to leverage constraints.

Thanks,
Ross




On Tue, Sep 24, 2013 at 8:15 AM, Ross Bennett <rossbennett34 at gmail.com>wrote:

> Thanks for making me aware of this. I'll take a closer look and try to
> figure out what is going on.
>
> Ross
> On Sep 24, 2013 8:03 AM, "Peter Carl" <peter at braverock.com> wrote:
>
>> Fair point.  I get the same result when I use high values for
>> max_permutations.  That attribute should probably be referenced in the
>> function documentation under details, so that users know it can be passed
>> through dots.
>>
>> Same result though.  When I call rp_sample directly:
>> rp_sample(init.portf, permutations=1000)
>> ... I get 1000 rows back.
>>
>> So something's happening in the dispatch code?
>>
>> pcc
>> --
>> Peter Carl
>> http://www.braverock.com/peter
>>
>> > On 09/24/2013 09:28 AM, Peter Carl wrote:
>> >> The random_portfolios function isn't generating the correct number of
>> >> permutations.
>> >>
>> >>> >random_portfolios(portfolio=init.portf, permutations=1000)
>> >> gives me a result with 317 weight vectors, rather than 1000.
>> >>
>> >> I think that there's a loop missing: when the number of lines is less
>> >> than
>> >> permutations, the function needs to generate more, check for unique
>> >> solutions, and repeat until there are (in this case) 1000 weight
>> >> vectors.
>> >>
>> >> Although (and it's difficult to tell), on their own the charts seem to
>> >> generate about the right number?  Or maybe not...
>> >
>> > I suspect that given your constraints you're just hitting
>> > max_permutations.
>> >
>> > All that code is still there, so it seems most likely that you just
>> > don't have max_permutations high enough, or that your granularity on the
>> > sequence is too high (e.g. you're using a step size of .01, and should
>> > try .005)
>> >
>> > --
>> > Brian G. Peterson
>> > http://braverock.com/brian/
>> > Ph: 773-459-4973
>> > IM: bgpbraverock
>> > _______________________________________________
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>> >
>>
>>
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