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I have 5 emerging market foreign exchange total return series, for which I am forecasting single period future returns (1 year). I would like to construct a Markowitz mean variance optimized portfolio of the 5 series, using historical variances and covariances (1) and my own forecast expected returns. Does R have an (easy) way/library to do this? In addition how would I go about calculating (1) is there a built in function?

For interest sake my currencies are USDTRY, USDZAR, USDRUB, USDHUF and USDPLN.

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You might look at the following:

http://cran.r-project.org/web/packages/tawny/index.html

http://www.rinfinance.com/RinFinance2009/presentations/yollin_slides.pdf

http://nurometic.com/quantitative-finance/tawny/portfolio-optimization-with-tawny

http://quantivity.wordpress.com/2011/04/17/minimum-variance-portfolios/

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  • $\begingroup$ and why didn't I find all this stuff! Awesome thanks Bill. $\endgroup$ – Thomas Browne May 22 '11 at 20:20
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Concerning this topic there was quite recently a fantastic Coursera MOOC from Professor Eric Zivot from the University of Washington:
Introduction to computational finance and Financial Econometrics

In case you don't have access there they will offer this course again starting Dec 17th 2012: https://www.coursera.org/course/compfinance

Meanwhile most of the material can be found here too:
http://faculty.washington.edu/ezivot/econ424/econ424.htm

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