Journal of Asset Management

, Volume 18, Issue 5, pp 371–387 | Cite as

Time-Dependent Black–Litterman

  • Martin van der SchansEmail author
  • Hens Steehouwer
Original Article


The Black–Litterman method is widely used in the investment management industry to incorporate views in investment portfolios. The method applies when views are expressed as expected returns over the horizon for which allocation decisions are made, i.e., the investment horizon. In practice, however, the investor’s views are typically formulated for the near future while the investor’s investment horizon is much longer. To incorporate such views, we introduce the time-dependent Black–Litterman method and show that, in a time-dependent setting, a distinction should be made between unconditional and conditional views. Furthermore, we demonstrate its use for buy and hold investors. In an example, we show that the investor’s views have a plausible impact on resulting allocation decisions.


Black–Litterman Kalman filter Asset allocation Views 



We would like to thank our colleagues Kai Ming Lee, Marc Francke, Alex Boer and Patrick Tuijp for their useful feedback on the paper.


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Copyright information

© Macmillan Publishers Ltd 2017

Authors and Affiliations

  1. 1.Ortec FinanceRotterdamThe Netherlands

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