Date: Tue, 20 Feb 2007 09:31:51 -0600
From: beliavsky@aol.com
Newsgroups: misc.invest.financial-plan
Subject: Re: Portfolio Optimization Software?
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On Feb 20, 5:02 am, sawyervill...@gmail.com wrote:
> I've finally gotten to the point will I would like to optimize my
> portfolio using MPT.
>
> I'm looking for some software (preferably free) that would allow me to
> run what/if scenarios.

If you have the return series, you can use Solver in Excel to compute
the historical optimal portfolio using by minimizing the portfolio
return variance subject to the constraint of the return exceeding a
target level and the portfolio allocations summing to one. I think
some web sites discuss this.

Given expected returns, volatilities, and correlations one can use the
online tool of William Sharpe (of CAPM fame) at
http://www.stanford.edu/~wfsharpe/ws/ws_opt.htm to find the optimal
portfolio.

A programmer can use the fPortfolio package
http://lib.stat.cmu.edu/R/CRAN/src/contrib/Descriptions/fPortfolio.html
of the free R statistical program or can write a program in C++ or
Fortran (there are other possibilities) and use one of the public
domain optimization codes in those languages. The inputs for portfolio
optimization are estimated with error, as noted by another poster. A
walk-forward test where portfolio weights are computed at each time
step using information known at the time can show whether portfolio
optimization is useful in a given context.