Timeline for How do I fit a constrained regression in R so that coefficients total = 1?
Current License: CC BY-SA 3.0
17 events
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| Nov 9 at 0:40 | answer | added | awhug | timeline score: 0 | |
| May 13, 2022 at 17:13 | history | protected | kjetil b halvorsen♦ | ||
| Apr 27, 2022 at 3:00 | history | tweeted | twitter.com/StackStats/status/1519149487503122432 | ||
| Mar 22, 2022 at 1:46 | answer | added | Alper Hekimoglu | timeline score: 1 | |
| Jul 31, 2019 at 16:48 | answer | added | dariober | timeline score: 5 | |
| Apr 13, 2017 at 12:44 | history | edited | CommunityBot |
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| Nov 22, 2016 at 15:20 | answer | added | Augi Lynch | timeline score: 1 | |
| Oct 17, 2015 at 22:03 | answer | added | Matifou | timeline score: 14 | |
| Jan 25, 2012 at 12:44 | vote | accept | Thomas Browne | ||
| Jan 24, 2012 at 14:10 | history | edited | user88 | CC BY-SA 3.0 |
edited title
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| Jan 23, 2012 at 19:14 | comment | added | whuber♦ | Not silly at all. Merely asking this question reflects a high level of thought. I was just checking my own understanding of your question to make sure you got an effective answer. Cheers. | |
| Jan 23, 2012 at 19:11 | comment | added | Thomas Browne | right..... simple as that. Thanks. I feel a bit silly now haha. | |
| Jan 23, 2012 at 19:06 | comment | added | whuber♦ | The reason for including a term for a safe rate of return is that sometimes it will have a nonzero coefficient. Presumably, safe instruments (overnight bank deposits) are available to everyone at low cost, so anyone ignoring this as a component of their investment basket could be choosing suboptimal combinations. Now, if the coefficients do not add to unity, so what? Just invest as much as you wish in the proportions estimated by the regression. | |
| Jan 23, 2012 at 18:49 | comment | added | Thomas Browne | It does because if you model this you will find that B1 + B2 + B3 > 1 in many cases (or < 1 in others). That is because the currency one is trying to replicate with the descriptors will typically have a larger or smaller volatility than the others, and so the regression will give you smaller or larger weights in response. This requires the investor either not to be fully invested, or to leverage, which I do not want. As for safe rate of return no. All we are trying to do is replicate series1 using other variables. Being a finance guy and not a statistician perhaps I have misnamed my question. | |
| Jan 23, 2012 at 17:12 | answer | added | Elvis | timeline score: 45 | |
| Jan 23, 2012 at 17:03 | comment | added | whuber♦ | Are you sure this is a constrained regression problem? As I read the question, you seek a relationship of the form $y_4$ (one Forex series) = $\beta_1 y_1 + \beta_2 y_2 + \beta_3 y_3$ (plus, I presume, a fourth term representing a prevailing safe rate of return). That's independent of the investment decision. If a customer wants to invest $c$ capital in $y_4$ using $y_1$, $y_2$, and $y_3$ as proxies, then they would just invest $c\beta_1$ in $y_1$, $c\beta_2$ in $y_2$, and $c\beta_3$ in $y_3$. That adds no special complication to the regression, does it? | |
| Jan 23, 2012 at 16:42 | history | asked | Thomas Browne | CC BY-SA 3.0 |