TY - JOUR T1 - Arithmetic and Continuous Return Mean-Variance Efficient Frontiers JF - The Journal of Investing SP - 62 LP - 69 DO - 10.3905/JOI.2009.18.3.062 VL - 18 IS - 3 AU - Robert A Ferguson AU - Dean Leistikow AU - Susana Yu Y1 - 2009/08/31 UR - https://pm-research.com/content/18/3/62.abstract N2 - 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 ER -