Mean Variance Frontier

Mean-Variance Analysis is a technique that investors use to make decisions about financial instruments to invest in, based on the amount of risk that they are willing to accept (risk tolerance). Ideally, investors expect to earn higher returns when they invest in riskier assets. When measuring the level of risk, investors consider the potential variance (which is the volatility of returns produced by an asset) against the expected returns of that asset. Mean-variance analysis essentially looks at the average variance in the expected return from an investment.