IDEAS home Printed from https://ideas.repec.org/p/boc/scon19/50.html
   My bibliography  Save this paper

A practical application of the mvport package: CAPM-based optimal portfolios

Author

Listed:
  • Carlos Dorantes

    (Tec de Monterrey)

Abstract

The mvport package has commands for financial portfolio optimization and portfolio backtesting. I present a practical implementation of a CAPM-based strategy to select stocks, and then apply different optimization settings, and evaluate the resulting portfolios. The presentation illustrates how to automate the process through a simple do file that allows to easily change parameters (e.g. stock list, market index, risk-free rate) using an Excel interface. The program automates the following: a) data collection, b) CAPM model estimation for all stocks, c) selection of stocks based on CAPM parameters, d) portfolio optimization with different configurations, and e) portfolio backtesting. For data collection, the getsymbols and the freduse command is used to get online price data for all the S&P500 stocks and the risk-free rate. For each stock, two competing CAPM models are estimated: using a simple regression, and using an autoregressive conditional heteroscedasticity (ARCH) model. The CAPM parameters are used to select stocks. Then the mvport package is used to optimize different configurations of the portfolio. Finally, the performance of each portfolio configuration is calculated is compared with the market portfolio.

Suggested Citation

  • Carlos Dorantes, 2019. "A practical application of the mvport package: CAPM-based optimal portfolios," 2019 Stata Conference 50, Stata Users Group.
    • Handle: RePEc:boc:scon19:50
    as

    Download full text from publisher

    File URL: http://fmwww.bc.edu/repec/scon2019/chicago19_Dorantes.pdf
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boc:scon19:50. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christopher F Baum (email available below). General contact details of provider: https://edirc.repec.org/data/stataea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.