GAMS Model

Our GAMS model incorporates both of the Advanced Models. It also gives the user the option to perform sensitivity analysis on the desired level of return, the desired levels of risk for each factor, and the economic outcomes of each risk factor.

Please feel free to download our GAMS model and run it using your own data. There are two files which are required:

GAMS Program File
This is the source file for the GAMS model with sensitivity analysis.
Data Input File
This file contains the input data for the gams program.

Instructions on using the GAMS program

In order to use this program, the user makes adjustments to the Data Input File. Possible inputs include:

The number of securities
The number of risk factors
The minimum desired rate of return of the risk minimization problem
The maximum desired level of risk for each risk factor
The risk free rate of return
The predicted economic outcomes for each risk factor
The betas for each stock / risk factor combination

Note: Please ensure that the number of risk factors and securities referred to in each table are the same as defined in the set at the top of the file.

The user also specifies one of the following four models within the Data Input File:

Model 1: Minimize risk subject to a desired rate of return
Model 2: Maximize return subject to desired levels of risk
Model 3: The same as Model 1, but with no sensitivity analysis
Model 4: The same as Model 2, but with no sensitivity analysis

In order to run the program, simply type "gams portfolio.gms" at the command line. The data input file should be called portfolio.input.
Note that Models 1 and 2 may take a few minutes to run and may appear to be on an endless cycle. Please be patient, and they will terminate within a few minutes.

The program will create an output file called portfolio.output. This file contains information on the optimal solution and the sensitivity analysis.
The sensitivity analysis shows the approximate upper and lower bounds on each item, with all others held constant, for which the current selection of securities remains both feasible and optimal. It also provides information on what the total portfolio risk and return are, and what the new portfolio would be at the upper or lower boundary.

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Last Updated November 19, 1997 by Chris Payton