Number of Simulations
The Simulations Field on the ribbon displays the number of simulations that the Optimizer runs during the optimization process. The number of simulations is a very important optimization input. Larger numbers produce more accurate approximations to the correct frontier portfolios for the given case, but take longer to run. When building a case and experimenting, you may wish to use fewer simulations (50 to 100) for the sake of speed. However, when the time has come to find the Michaud Resampled Efficient Frontier™ that you will actually invest in, run a greater number of simulations (1000+) to produce an accurate answer without any unnecessary simulation error. The margin of error for each asset can be found in the Standard Error Column on the Results Worksheet. Increasing the number of simulations will generally reduce the standard errors. We recommend making sure that the standard error for each asset is an amount that could be tolerated as error in the final portfolio. The greatest standard error appears on the progress bar as the optimization is running as the Portfolio Convergence statistic.
If you wish the Optimizer to automatically run enough simulations so that margin of error is below a specified number, use the Optimization Tolerance feature.
After optimization, both the number of simulations requested and the number of simulations run appear in the Simulations Run/Requested Field on the Info Worksheet. If the numbers are different, something occurred to halt the optimization in the middle, probably you hitting the Stop Button on the progress meter. Whether or not the simulations were completed, review the standard error of the asset weights to determine whether or not more simulations would be helpful.
If you select a classical optimization when you set the forecast confidence, the Optimizer ignores number of simulations as it only needs to run one simulation.
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Note: Rebalancing simulations is a separate field within the Rebalancing drop down menu.