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A demystification of the Black–Litterman model: Managing quantitative and traditional portfolio construction

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.

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Satchell, S., Scowcroft, A. A demystification of the Black–Litterman model: Managing quantitative and traditional portfolio construction. J Asset Manag 1, 138–150 (2000). https://doi.org/10.1057/palgrave.jam.2240011

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Keywords

  • Bayesian portfolio construction
  • Black–Litterman model
  • optimisation
  • asset allocation