Minimum-variance frontier

Minimum-variance frontier

Graph of the lowest possible portfolio variance that is attainable for a given portfolio expected return.

Minimum-Variance Frontier

In Markowitz portfolio theory, the frontier on a chart representing a portfolio with the least amount of volatility. That is, a minimum-variance frontier consists of data points representing stocks with a certain level of volatility and therefore risk, while the frontier represents a portfolio in which the volatilities of each individual stock offset each other. A minimum-variance frontier is also a Markowitz efficient frontier if it also represents the maximum level of return for its level of risk.
References in periodicals archive ?
While the normality assumption is restrictive, it allows us to (1) understand the determinants of the difference between the unconstrained and constrained HJ-bounds, (2) establish a connection between the minimum-variance frontier and the constrained HJ-bound; and (3) conduct finite sample inference on the sample HJ-bounds.
and a = [mu]'[V.sup.-1][mu], b = [1'.sub.N][V.sup.-1][mu], and c = [1'.sub.N][V.sup.-1][1.sub.N] are the three efficiency set constants that characterize the minimum-variance frontier of the N risky assets.
Hansen and Jagannathan (1991) provide a linkage between the minimum-variance frontier and the unconstrained HJ-bound.
In order to locate the portfolio with minimum second moment, we draw a circle with its center at the origin, and the location of the minimum second moment portfolio [p.sup.*] can be obtained from the point where the circle is tangent to the minimum-variance frontier of the risk-free and risky assets.
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