RE: random generation of constrained portfolio allocation weights

Posted by Hurd, Matthew on Sep 08, 2004; 11:26pm
URL: http://quantlib.414.s1.nabble.com/random-generation-of-constrained-portfolio-allocation-weights-tp3309p3310.html

> I agree, your method seems to be OK for the original example {0.4,
0.4, 0.4}
> or the general symmetrical  problem {M, M,..., M}, 1/N<=M<=1, although
I
> would suggest some more testing, especially in higher dimensions.

Also, perhaps the question is wrong.  For example, if you have
constraints of 0-20% for 500 stocks in an index, attacking with a
uniform distribution for each variate will result in the first few being
allocated reasonable numbers followed by practically nothing for the
rest as the weights available for allocation will, essentially, be
consumed.  This will result in a result set where there are a few spikes
and lots of zero values, which is probably not what you're after.  You
need more satisfactory constraints to satisfactorily satisfy or a better
than uniform distribution :-)

$0.02

Matt.



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