Hi all, I have monthly historical returns over 30yrs for 2 asset: Australian Equity and Australian Fixed Income. Do you have any other ideas on how to generate a MV frontier in EXCEL? ---->I’m thinking using data analysis toolpack to generate a covariance matrix - assuming that historical returns are stationary. Using solver to find efficient portfolios. Correct way? What I’m having trouble with is part 2- Cholesky decomposition of covariance matrix and simulating future returns over a 10 year period. Yes I did google, someone care to explain it in words rather than matrix algebra? Thanks in advance. Help is really appreciated!
If you are using historical returns as a proxy for future expected returns, just create a simple chart showing risk vs reward. You can have same in column A the Weights in Equity starting at 100% and dropping by 1% increments and the Weights in Fixed Income starting in Column B at 0% and increaseing by 1% increments. Return is easy to calculate and so is std deviation… then just plot those points and it will create an efficient fronteir for you…