How can I make Portfolio Optimizations in Financial Toolbox optimize on multiperiod geometric returns?
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I would like to make Financial Tool Box functions (ie @Portfolio) optimize / calculate efficient frontier with multi-period geometric values. For example, if I have monthly return streams to get mean and covariance estimates on monthly values, I would like to make the optimizer calculate the frontier on say 12 months values by making each portfolio evaluated ex post annualized (1+R)^12-1 for Return and sqrt(12)*Vol for standard deviation. Multi-period sharpe ratios with constant rebalancing (monthly in thie case) are higher for higher risk-return assets due to compounding. It has the effect of pushing out the frontier at higher return values. For concreteness, if Portfolio A has 10% return and 20% risk and B has 20% return and 40% risk in a single period and both are on the single period frontier with risk free return of 0%, when moving to the multi-period geometric (irrelevant if arithmetic) frontier asset A will be inside the frontier. I have tried editing the underlying code but it is a .p file so cannot. Please help.
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