[Gretl-users] Re: Coefficient restrictions (Riccardo (Jack) Lucchetti)

Jack, Thanks. This works like a charm. Wilson My problem: Regressing the returns from a portfolio against the returns from several market benchmarks. Restrict the model so that each coefficient is non-negative and they sum to 1. Suggestions? Jack's solution: Express (n-1) portfolio weights as squared parameters and the n-th one as 1 minus all the others. Estimate via nls. Example: nls rPORT = w1*rSP500 + w2*rSP400 + w3*rSP600 w1 = b1^2 w2 = b2^2 w3 = 1 - w1 - w2 params b1 b2 end nls