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An application of the Black–Litterman model with EGARCH-M-derived views for international portfolio management

Financial Markets and Portfolio Management volume 21, pages 147–166 (2007)Cite this article

Abstract

This paper provides an application of the Black–Litterman methodology to portfolio management in a global setting. The novel feature of this paper relative to the extant literature on Black–Litterman methodology is that we use GARCH-derived views as an input into the Black–Litterman model. The returns on our portfolio surpass those of portfolios that rely on market equilibrium weights or Markowitz-optimal allocations. We thereby illustrate how the Black–Litterman model can be put to work in designing global investment strategies.

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Authors and Affiliations

  1. Department of Accounting and Finance, College of Business and Economics, Radford University, Radford, VA, 24142-6951, USA

    Steven L. Beach

  2. Department of Economics, College of Business and Economics, Radford University, Radford, VA, 24142-6952, USA

    Alexei G. Orlov

Authors
  1. Steven L. Beach
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  2. Alexei G. Orlov
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Correspondence to Steven L. Beach.

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Beach, S.L., Orlov, A.G. An application of the Black–Litterman model with EGARCH-M-derived views for international portfolio management. Fin Mkts Portfolio Mgmt 21, 147–166 (2007). https://doi.org/10.1007/s11408-007-0046-6

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  • DOI: https://doi.org/10.1007/s11408-007-0046-6

Keywords

  • Black–Litterman
  • GARCH
  • Global portfolio management

JEL Classification

  • G11
  • G15