[R-SIG-Finance] fPortfolio plotting of efficient frontiers

[Brian G. Peterson]

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