rank2return function

Compute the portfolio return knowing the rank of a stock in the input `mtx'.

This function computes the return earned knowing the rank of a stock in the input mtx of stock returns. For example, mtx has p=28 Dow Jones stocks over n=169 monthly returns. Portfolio weights are assumed to be linearly declining. If maxChosen=4, the weights are 4/10, 3/10, 2/10 and 1/10, which add up to unity. These portfolio weights are assigned in reverse order in the sense that first chosen stock (choice rank =1) gets portfolio weight=4/10. The function computes return from the stocks using the `myrank' argument.

rank2return(mtx, myrank, maxChosen = 0, pctChoose = 20, verbo = FALSE)

Arguments

• mtx: a matrix with n rows (number of returns) p columns (number of stocks)
• myrank: vector of p integers listing the rank of each stock, 1=best
• maxChosen: number of stocks in the portfolio (with nonzero weights) default=0. When maxChosen=0, we let pctChoose determine the maxChosen
• pctChoose: percent of p stocks chosen inside the portfolio, default=20
• verbo: logical if TRUE, print, default=TRUE

Returns

average return from the linearly declining portfolio implied by the myrank vector.

See Also

outOFsamp

Author(s)

Prof. H. D. Vinod, Economics Dept., Fordham University, NY