Parts 1 and 2 left a trail of breadcrumbs to follow.  Now I provide a full-color map, a GPS, and local guide.  In other words the complete solution in the R statistical language.

Recall that the fast way to compute portfolio variance is:

The companion equation is rp = wTrtn, where rtn is a column vector of expected returns (or historic returns) for each asset.  The first goal is to find find w0 and wn. w0 minimizes variance regardless of return, while wn maximizes return regardless of variance.  The goal is to then create the set of vectors {w0,w1,…wn} that minimizes variance for a given level of expected return.

I just discovered that someone already wrote an excellent post that shows exactly how to write an MVO optimizer completely in R. Very convenient!  Enjoy…

http://economistatlarge.com/portfolio-theory/r-optimized-portfolio

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