Efficient Frontier

Resampling the Efficient Frontier: An Illustration During the Codiv-19 Pandemic

Overview A well-known problem with mean-variance portfolio optimization is that it is subject to instability: small changes in the inputs lead to large differences in the optimal portfolios. Since estimates of the required parameters (particularly the expected returns) using historical returns are extremely noisy, this results in unstable portfolios that would required frequent rebalancing.