BacktestFolio · Glossary
Efficient Frontier
In plain language
For every level of risk you are willing to accept, there is an optimal combination of assets that gives the maximum possible return. Portfolios outside the frontier are 'inefficient': you can do better with the same risk.
Technical definition
The set of portfolios that maximise expected return for each level of risk (volatility), according to Markowitz theory (1952). Every portfolio on the frontier is not dominated by any other.