Instability of the minimum variance frontier?

[broadex]

Which of the following is least likely to be a problem related to the instability of the minimum variance frontier?
a. Infrequent rebalancing
b. Time instability
c. Overfitting

 

[mehdizaman]

In my oppinion its infrequent rebalancing, high frequency of rebalancing is quite an issue with the minimum variance frontier

 

[broadex]

mehdizaman wrote:
In my oppinion its infrequent rebalancing, high frequency of rebalancing is quite an issue with the minimum variance frontier

YES you are correct. Could you please expand the answer a bit. Perhaps start off with “instability” of minium variance…what exactly do we mean by this

 

[mehdizaman]

The chief problem in Min variance frontier is that small changes in input assumptions can lead to large changes in min variance frontier, this problem is called Instability in Min Variance Frontier; the definition given in the cirriculum

 

[pmond]

What the heck is time instability?

 

[Money_Manager]

The answer is a) infrequent rebalancing. Frequent rebalancing is a characteristic of instability.