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    Matlab Intro For Asset Pricing

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    Fabio Barbosa
    The document provides an introduction to MATLAB, covering basic topics such as command window, matrices, built-in functions, plotting, programming, and debugging. It explains how to load and save data, write scripts and functions, and introduces optimization toolboxes and the debugger tool.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Matlab Intro For Asset Pricing

    Uploaded by

    Fabio Barbosa
    6 views5 pages
    The document provides an introduction to MATLAB, covering basic topics such as command window, matrices, built-in functions, plotting, programming, and debugging. It explains how to load and save data, write scripts and functions, and introduces optimization toolboxes and the debugger tool.

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    Matlab intro for Asset Pricing

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    The document provides an introduction to MATLAB, covering basic topics such as command window, matrices, built-in functions, plotting, programming, and debugging. It explains how to load and save data, write scripts and functions, and introduces optimization toolboxes and the debugger tool.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    6 views5 pages

    Matlab Intro For Asset Pricing

    Uploaded by

    Fabio Barbosa
    The document provides an introduction to MATLAB, covering basic topics such as command window, matrices, built-in functions, plotting, programming, and debugging. It explains how to load and save data, write scripts and functions, and introduces optimization toolboxes and the debugger tool.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    You are on page 1of 5

    Introduction to MATLAB

    Joao Pedro Pereira, 9/Oct/2014

    1 Basic setup
    - Command window
    - Current directory
    o Default: C:\MATLAB7\work
    o To change it: drop-down menu or cd 'C:\[...path...]\myfolder'

    2 Data Structures
    - Simple variables:
    o A = 5
    o a = 10*3^(5-2)
    o Warning: Matlab is case sensitive!!
    - Matrix:
    o A = [110 120; 210 220]
    o To get the values stored in the matrix use subscripts:
     A(1,2)
     A(1,:)
    - Multidimensional arrays, strings, structures (see tutorial)

    3 Matrix operators
    - Standard rules: A + B , A – B , A * B
    - Element-wise operations: A .* B , A ./ B
    - Transpose and inverse: A’ , inv(A)

    4 Built-in functions
    - Ex: exp(5) , log(10)
    - Ex: sum(A) , mean(A) , std(A)
    - Easy way to create some useful matrices:
    o ones(5,1)
    o eye(5)
    o zeros(3,2)
    - Generate random numbers from standard normal distribution:
    o randn(5,1)
    - The help system is very good – just type the name of what you need to do.

    5 Scripts & User created Functions (.m files)


    Script:
    clear; clc;
    a = 2;
    b = 3*2;
    c = a + b

    Page 1 of 5
    Function:
    Write the following in a separate .m file and save it as add2num.m.
    function out = add2num(in1,in2)
    out = in1 + in2;

    Can use this function in any other script or function by doing:


    y = add2num(a,b)

    6 Toolboxes
    - Some come with matlab. Important toolboxes: optimization, statistics.
    - Public domain:
    o www.mathworks.com has many functions posted by users
    o http://www.spatial-econometrics.com/ is a useful toolbox for
    econometrics
    o Search with Google…
    - Functions written in C or Fortran can be compiled and integrated into Matlab

    Note: need to update the path after installation of new toolboxes.

    7 Plots
    7.1 Simple x-y plot
    c = 0.5:0.1:1.5;
    u = log(c);
    plot(c,u);

    7.2 Figures with several plots


    figure(1)

    % draw density
    subplot(2,1,1);
    x = (-5:0.01:5)';
    y = normpdf(x,0,1);
    plot(x,y)

    % generate random numbers and plot histogram


    subplot(2,1,2);
    z = randn(10000,1);
    hist(z,50)

    8 Input data from Excel


    Excel file named datafile.xls
    y x1 x2
    10 2 1000
    20 5 1500
    30 4 940
    25 1 700
    15 6 500
    16 9 1900

    Page 2 of 5
    Script:
    N = xlsread('datafile.xls');
    y = N(:,1);
    X = N(:,2:3);
    % do a linear regression:
    beta = inv(X'*X)*X'*y

    9 To save your output


     Ouput as Figure: save it as jpg or eps using the figure menu; then import into
    Word, Latex, etc.
     Output in Command window: copy-paste.
     Data created in Matlab
    o Save it in a .mat file: save filename.mat var1 var2 (or use the
    buttons in the workspace window)
    o Retrieve the data with: load filename.mat
    o Can also export data in Excel, txt, csv formats (search help)

    10 Programming
    10.1 Example: for cycle, if statement
    % remove outliers
    prices = [23 25 2000 22 21]'
    [T ~] = size(prices);
    for t = 1:T
    if prices(t) > 1000
    prices(t) = NaN;
    end
    end

    10.2 Example: portfolio choice


    (These are the initial steps of the homework project)

    10.2.1 Main script


    % HW on the mean-var frontier

    clear; clc;

    % input data
    temp = xlsread('10_Industry_Portfolios');
    ret = temp(:,2:end)/100;
    rf = 0.4/100;

    % compute moments
    er = (mean(ret))';
    V = cov(ret);

    % draw the frontier


    reqrets = 0.00:0.001:0.02;
    for i = 1:length(reqrets)
    [trash, rfront(i), varfront(i)] = frontierp(reqrets(i),V,er);
    end

    Page 3 of 5
    figure(1);
    plot(varfront.^.5,rfront);
    title('Mean-Std Frontier');
    ylabel('E[ret]'); xlabel('\sigma(ret)');

    % now add frontier with rf


    for i = 1:length(reqrets)
    [trash, rfront(i), varfront(i)] =
    rffrontierp(reqrets(i),V,er,+rf);
    end
    hold on;
    plot(varfront.^.5,rfront);
    hold off;

    10.2.2 Auxiliary function


    function [weights, retp, varp] = frontierp(E,V,er)
    %
    % E required ret on the porf
    % V cov matrix
    % er vector of expected returns

    T = length(er);

    % Mean var frontier


    one = ones(T,1); % unit vector
    A = one'*inv(V)*er;
    B = er'*inv(V)*er;
    C = one'*inv(V)*one;
    D = B*C - A^2;

    weights = (C*E-A)/D* inv(V)*er + (B-A*E)/D*inv(V)*one;

    retp = weights'*er;

    varp = weights'*V*weights;

    10.2.3 What is left for you to do?


    1) Write the auxiliary function rffrontierp() in a new rffrontierp.m file.
    2) Complete the main script to answer the other questions in the homework.

    10.3 Example: optimization


    Example: find the minimum of f(x) = x^2 – 3.

    Auxiliary function (in file myfn.m):


    function y = myfn(x)
    y = x^2 - 3;

    In the main script:


    x0 = 5; % initial guess
    [xopt, fopt] = fminsearch(@myfn,x0)

    Page 4 of 5
    The Optimization toolbox has several functions for other optimization problems
    (constrained, etc)

    10.4 Debugger
    Matlab has an excellent debugger. If your code has an error or is not giving the expected
    result, using the debugger is the best way to fix the code.
    1. In the Editor, click the “-“ next to the line number(s) you want to audit. A red dot
    will appear.
    2. Run the code (F5)
    3. Matlab will pause on the line you marked and allow you to see all the current
    variables.
    4. Click on the buttons or press F5 to continue to the next lines.

    11 Where to go from here


    - Good tutorial at Help\Matlab\Getting Started
    - Search full text or for function names in the Help search box
    - If you are totally new to programming, a good place to start is http://code.org/

    Page 5 of 5

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