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From: Soomin Lee on 9 Feb 2010 14:45
Hi all,

In matlab PORTSTATS function, how do they calcualte PortRisk and PortReturn?
For example,
----------------------------------
ExpReturn = [0.1 0.2 0.15];

ExpCovariance = [0.0100 -0.0061 0.0042
-0.0061 0.0400 -0.0252
0.0042 -0.0252 0.0225 ];

PortWts=[0.4 0.2 0.4; 0.2 0.4 0.2];

[PortRisk, PortReturn] = portstats(ExpReturn, ExpCovariance,...
PortWts)

PortRisk =

0.0560
0.0550

PortReturn =

0.1400
0.1300
----------------------------------

I know that PortReturn = ExpReturn*PortWts', but how about PortRisk?

Thanks for your help.
From: Wayne King on 9 Feb 2010 15:07
"Soomin Lee" <soominl(a)gmail.com> wrote in message <hkse0h$m3v$1(a)fred.mathworks.com>...
> Hi all,
>
> In matlab PORTSTATS function, how do they calcualte PortRisk and PortReturn?
> For example,
> ----------------------------------
> ExpReturn = [0.1 0.2 0.15];
>
> ExpCovariance = [0.0100 -0.0061 0.0042
> -0.0061 0.0400 -0.0252
> 0.0042 -0.0252 0.0225 ];
>
> PortWts=[0.4 0.2 0.4; 0.2 0.4 0.2];
>
> [PortRisk, PortReturn] = portstats(ExpReturn, ExpCovariance,...
> PortWts)
>
> PortRisk =
>
> 0.0560
> 0.0550
>
> PortReturn =
>
> 0.1400
> 0.1300
> ----------------------------------
>
> I know that PortReturn = ExpReturn*PortWts', but how about PortRisk?
>
> Thanks for your help.

Hi Soonmin Lee,
the PortRisk is the
sqrt(Wts*ExpCovariance*Wts')

where Wts is the vector of weightings for the different assets in the portfolio and ExpCovariance is the NASSETSxNASSETS matrix specifying the covariance of the asset returns.

Hope that helps,
Wayne
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