MATLAB: Portfolio optimization using fmincon

expected returnfminconoptimizationportfoliostocktoolboxvariance

I am trying to predict the weights for my stocks that optimize my portfolio by reducing variance. My equation that I am using to predict the variance is
>>function f = varmin(x,VCV) >>f = ((x' * VCV) * x);
where x is the weights and VCV is the variance covariance matrix. Every time I run the program fmincon, I get an error relating to my function "varmin" saying
>>Not enough input arguments.
>>Error in varmin (line 2) >>f = ((x' * VCV) * x);
>>error in fmincon (line 536) >> initVals.f = feval(funfcn{3},X,varargin{:});
>>Caused by: >> Failure in initial objective function evaluation. FMINCON cannot >>continue.
this is what the fmincon equation looks like
>>w = fmincon('varmin',x,a,b,Aeq,Beq,MinWt,MaxWt);
if anyone has any advice that would be greatly appreciated.

Best Answer

If VCV is a given matrix in your workspace, take
fun = @(x)x'*VCV*x;
and then call
w = fmincon(fun,x,a,b,Aeq,Beq,MinWt,MaxWt);
Make sure that your initial x (which I would call x0) is a column vector.
Alan Weiss
MATLAB mathematical toolbox documentation
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