Today’s payrolls report for June looks quite good—for several reasons. First, the private sector created a net 202,000 jobs last month, well above expectations. Second, payrolls increased by quite a bit more in April and May than initially estimated, the Labor Department reports today. May’s initially reported private-sector advance of 178,000 jobs, for instance, is now estimated as an increase of 207,000. Thirdly, the year-over-year pace of private payrolls growth is rising, which suggests that the positive momentum in the labor market is strengthening and will roll on for the near term.
Daily Archives: July 5, 2013
Research Review | 7.5.13 | Portfolio Management
End the Charade: Replacing the Efficient Frontier with the Efficient Range
Meir Statman (Santa Clara University) and Joni Clark | July 2013
● Imprecise estimates are one source of gaps between optimized mean-variance portfolios and portfolios that investors prefer. Investor preferences beyond high mean and low variance is the other source. Both sources of gaps call for investor judgment.
● Harry Markowitz, who introduced mean-variance portfolio theory and its optimizer, noted that judgment plays an essential role in the proper application of mean-variance analysis.
● The charade of the efficient frontier involves “massaging” the estimates of the mean-variance parameters until they yield the efficient frontier and portfolios we prefer.
● This paper offers the “efficient range,” the location of portfolios that acknowledge imprecise estimates of mean-variance parameters and accommodate investor preferences beyond high mean and low variance, as a replacement for the “efficient frontier.”