fPortfolio plotting of efficient frontiers
Charles Ward wrote:
But if I calculate the frontier using the Kendall method (stored in f9) and plot two frontiers using frontierPlot, they appear on the same horizontal risk-scale. Shouldn't the two scales be different?
Charles,
The two efficient frontiers would not be comparable if plotted on different
axes on the same chart.
The (typical) reason for plotting multiple efficient frontiers is to see how
the unconstrained (or long only) Markowitz mean-variance frontier 'shrinks'
with different constraints or risk measures. By definition, the area under
these more-restricted efficient frontiers will be smaller than the
unconstrained or long-only case.
A modification to this approach that we use often it to set the 'risk' axis to
the risk measure you really care about, such as CVaR, and then plot the
unconstrained or long-only efficient frontier on/against *that* axis.
Regards,
- Brian
Brian G. Peterson http://braverock.com/brian/ Ph: 773-459-4973 IM: bgpbraverock