The Black–Litterman (BL) model has been proposed as a valid solution to the problem of the estimation error in the mean–variance (MV) model. However, very little research has been done in order to empirically test the performance of the model. The paper contributes to the existing literature by empirically examining the out-of-sample performance of the BL model with respect to other asset allocation strategies. As another contribution of the paper, we suggest a novel approach to specify the investor’s views in the BL model. Overall our results suggest that the BL model is a valid asset allocation strategy.

The Black–Litterman model and views from a reverse optimization procedure: an out-of-sample performance evaluation / Allaj, E.. - In: COMPUTATIONAL MANAGEMENT SCIENCE. - ISSN 1619-697X. - 17:3(2020), pp. 465-492. [10.1007/s10287-020-00373-6]

The Black–Litterman model and views from a reverse optimization procedure: an out-of-sample performance evaluation

Allaj E.
2020

Abstract

The Black–Litterman (BL) model has been proposed as a valid solution to the problem of the estimation error in the mean–variance (MV) model. However, very little research has been done in order to empirically test the performance of the model. The paper contributes to the existing literature by empirically examining the out-of-sample performance of the BL model with respect to other asset allocation strategies. As another contribution of the paper, we suggest a novel approach to specify the investor’s views in the BL model. Overall our results suggest that the BL model is a valid asset allocation strategy.
The Black–Litterman model and views from a reverse optimization procedure: an out-of-sample performance evaluation / Allaj, E.. - In: COMPUTATIONAL MANAGEMENT SCIENCE. - ISSN 1619-697X. - 17:3(2020), pp. 465-492. [10.1007/s10287-020-00373-6]
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11381/2911804
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