A New Model for Defining Forecasts in Black Litterman

Miroslav Vladimirov ()
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Miroslav Vladimirov: University of Economics - Varna

Izvestia Journal of the Union of Scientists - Varna. Economic Sciences Series, 2017, issue 1, 248-253

Abstract: The general contribution of this research is the implementation of new formal type of relative view, which has been added to the Black-Litterman model (BLM) for asset management. It is well known that the BLM integrates both historical data about the assets returns and subjective views given by experts and investors. Such complicated model is expected to give more realistic assessment about the dynamical behavior of the stock exchanges. The BLM applies both absolute and relative views about the asset returns. The paper proves that the currently applied relative views with equal weights are equivalent to assess the risk of a virtual portfolio with these assets of the view which participate with equal weights. The paper extends this form of views, applying non-equal weights of the assets.

Keywords: optimization of assets allocation; modeling market behavior; assessment of portfolio risks and returns; formal description of subjective views (search for similar items in EconPapers)
JEL-codes: A00 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:vra:journl:y:2017:i:1:p:248-253

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