@article {Ferguson62, author = {Robert A Ferguson and Dean Leistikow and Susana Yu}, title = {Arithmetic and Continuous Return Mean-Variance Efficient Frontiers}, volume = {18}, number = {3}, pages = {62--69}, year = {2009}, doi = {10.3905/JOI.2009.18.3.062}, publisher = {Institutional Investor Journals Umbrella}, abstract = {The arithmetic mean-variance frontier shows that taking more risk is always rewarded with higher expected arithmetic return. This article shows that there is a danger from being too aggressive that is not reflected in the arithmetic return mean-variance frontier because expected arithmetic return is a poor indicator of long-term arithmetic return. Since long-term arithmetic return is equivalent to long-term average continuous return, the relevant mean-variance frontier replaces expected arithmetic return with expected continuous return. The article shows that, for the continuous return mean-variance frontier, expected return initially rises, then declines and becomes negative as risk increases.TOPICS: Factors, risk premia, portfolio theory, portfolio construction}, issn = {1068-0896}, URL = {https://joi.pm-research.com/content/18/3/62}, eprint = {https://joi.pm-research.com/content/18/3/62.full.pdf}, journal = {The Journal of Investing} }