Dear List,
I had a look at the code of the PerformanceAnalytics package and I use
this package on a regular basis.
The style.fit function for Style Analysis provides thrree supported
methods, which can be chosen via a parameter. I am talking of the
normalized method here. This method requires the regression coefficients
to sum to 1.
Indeed the code in Version 1.0.0 says something like this:
[... Default implementation ...]
column.weights = as.data.frame(coef(column.lm))
[...]
if (method == "normalized") {
column.weights = column.weights/sum(column.weights)
}
I suppose here we are just scaling the coefficients to sum to 1, in my
view the regression should a priori deal with this restriction (some
sort of constrained regression or the like).
At least if you look at Tabel 2 of Sharpe (1992) the coefficients do not
support the actual implementation and I think somebody might want to
have a look at this code fragment.
Unfortunately I do not know how to implement this kind of restricted
regression in R, but I believe there are already ways of doing this.
Perhaps somebody from the list can guide us to the right direction.
Anyway great thx to the authors of this packkage!
Thomas
PS: In Stata the right command seems to be cnsreg.
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