End the Charade: Replacing the Efficient Frontier with the Efficient Range

15 Pages Posted: 10 Mar 2013

See all articles by Meir Statman

Meir Statman

Santa Clara University - Department of Finance

Joni Clark

Loring Ward

Date Written: March 1, 2013

Abstract

Gaps between optimized portfolios produced by mean-variance optimizers and portfolios that investors prefer come from two sources. One is imprecise estimates of mean-variance parameters. The other is investor preferences beyond high expected returns and low risk. We offer the mean-variance ‘efficient range’ as the location of all mean-variance efficient portfolios that acknowledge imprecise estimates and accommodate investor preferences.

Keywords: Mean variance optimizers, efficient frontier, efficient range, investor preference, mean-variance efficient portfolios

JEL Classification: G00, G10, G11

Suggested Citation

Statman, Meir and Clark, Joni, End the Charade: Replacing the Efficient Frontier with the Efficient Range (March 1, 2013). Available at SSRN: https://ssrn.com/abstract=2230548 or http://dx.doi.org/10.2139/ssrn.2230548

Meir Statman (Contact Author)

Santa Clara University - Department of Finance ( email )

500 El Camino Real
Santa Clara, CA 95053
United States
408-554-4147 (Phone)
408-554-4029 (Fax)

Joni Clark

Loring Ward ( email )

3055 Olin Avenue, Suite 2000
San Jose, CA 95128
United States

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