End the Charade: Replacing the Efficient Frontier with the Efficient Range
15 Pages Posted: 10 Mar 2013
Date Written: March 1, 2013
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: Suggested Citation