When variance is not enough

Variance as a risk measure is convenient, but has some drawbacks. For instance, when using variance, positive changes in the return can be considered as the increase of risk. Therefore, more sophisticated risk measures have been developed.

For example, see the following short demo about various methods applied against the previously described IT_return assets for a quick overview about the options provided by the fPortfolio package:

> Spec <- portfolioSpec()
> setSolver(Spec) <- "solveRshortExact"
> setTargetReturn(Spec) <- mean(colMeans(IT_return))
> efficientPortfolio(IT_return, Spec, 'Short')
> minvariancePortfolio(IT_return, Spec, 'Short')
> minriskPortfolio(IT_return, Spec)
> maxreturnPortfolio(IT_return, Spec)

These R expressions return different portfolio weights computed by various methods not discussed in this introductory chapter. Please refer to the package bundled documentation, such as ?portfolio, and the relevant articles...