RT Journal Article
SR Electronic
T1 The Efficient Frontier: A Note on the Curious Difference between Variance and Standard Deviation
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 93
OP 97
DO 10.3905/jpm.2021.1.300
VO 48
IS 1
A1 Richard Roll
YR 2021
UL https://pm-research.com/content/48/1/93.abstract
AB The Markowitz frontier of optimal portfolios is valid in both mean–variance space and in mean–standard deviation space. There are, however, some curious differences because lines in one space become curves in the other. This article explores and explains the curiosity.Key Findings▪ The capital allocation line is a curve in mean–variance space.▪ There is a line in mean–variance space that connects the riskless rate with the tangency portfolio, but it is not a capital allocation line.▪ Volatility can be either standard deviation or variance, but their efficient frontier geometry is curiously different.