Paper
Journal of Asset Management (2000) 1, 138–150; doi:10.1057/palgrave.jam.2240011
A demystification of the Black–Litterman model: Managing quantitative and traditional portfolio construction
- 1Trinity College, Cambridge University, Trinity Lane, Cambridge, CB2 1TQ, UK, Tel: +44(0) 1223 338409; Fax: +44(0) 1223 335475; Email: ses11@econ.cam.ac.uk
- 2head of equities quantitative research at UBS Warburg
Received 20 January 2000.
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Abstract
The purpose of this paper is to present details of Bayesian portfolio construction procedures which have become known in the asset management industry as Black–Litterman models. We explain their construction, present some extensions and argue that these models are valuable tools for financial management.
Keywords:
Bayesian portfolio construction, Black–Litterman model, optimisation, asset allocation
