It is used when an investor or analyst is faced with determining which asset classes, such as domestic fixed income, domestic equity, foreign fixed income, and foreign equity, to invest in and what proportion of the total portfolio should be of each asset class.
[1] In 1959, Harry Markowitz first described a method for constructing a portfolio with optimal risk/return characteristics.
[2] Because the Markowitz or Mean-Variance Efficient Portfolio is calculated from the sample mean and covariance, which are likely different from the population mean and covariance, the resulting investment portfolio may allocate too much weight to assets with better estimated than true risk/return characteristics.
To account for the uncertainty of the sample estimates, a financial analyst can create many alternative efficient frontiers based on resampled versions of the data.
Each resampled dataset will result in a different set of Markowitz efficient portfolios.