Efficient Frontier
The efficient frontier represents the set of portfolios with maximum expected return for each risk level.
Why Efficient Frontier Matters
- It frames allocation as a risk-return efficiency problem.
- It highlights portfolios that are dominated by better alternatives.
- It supports objective rebalancing decisions under constraints.
Practical Use
- Set target risk and return bounds before optimization.
- Apply concentration and turnover constraints for realism.
- Re-evaluate frontier assumptions as market regime changes.