Efficient Frontier - Comparing Different Volatility Estimators

Modern Portfolio Theory (MPT) according to
Markowitz states that investors form mean-variance efficient
portfolios which maximizes their utility. Markowitz proposed the
standard deviation as a simple measure for portfolio risk and the
lower semi-variance as the only risk measure of interest to rational
investors. This paper uses a third volatility estimator based on
intraday data and compares three efficient frontiers on the Croatian
Stock Market. The results show that range-based volatility estimator
outperforms both mean-variance and lower semi-variance model.

• Tea Poklepović
• Zdravka Aljinović
• Mario Matković

• Variance
• lower semi-variance
• range-based volatility.

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