Black-Litterman model - Sensitivity of the optimal portfolio allocation with respect to changes in the level of confidence in expressed views
(2012) NEKH01 20121Department of Economics
- Abstract
- This paper investigates the sensitivity of portfolio distributions generated by the Black-Litterman model for changes in the confidence level in the investors’ views. The empirical study is performed in an investment universe consisting of assets formed on size and book-to-market value. In this framework the sensitivity of the popular investment strategies of value stocks versus growth stocks and small firms versus large firms is investigated and compared. We find that changes in the confidence level of views may have dramatic effects on the portfolio allocations and furthermore that some investment strategies may be more sensitive than others to changes in the level of confidence expressed in the views.
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/2702093
- author
- Oderud, Niklas LU
- supervisor
- organization
- course
- NEKH01 20121
- year
- 2012
- type
- M2 - Bachelor Degree
- subject
- keywords
- Black-Litterman, Asset allocation, Bayesian portfolio selection, Modern Portfolio Theory.
- language
- English
- id
- 2702093
- date added to LUP
- 2012-06-15 12:43:13
- date last changed
- 2012-06-15 12:43:13
@misc{2702093, abstract = {{This paper investigates the sensitivity of portfolio distributions generated by the Black-Litterman model for changes in the confidence level in the investors’ views. The empirical study is performed in an investment universe consisting of assets formed on size and book-to-market value. In this framework the sensitivity of the popular investment strategies of value stocks versus growth stocks and small firms versus large firms is investigated and compared. We find that changes in the confidence level of views may have dramatic effects on the portfolio allocations and furthermore that some investment strategies may be more sensitive than others to changes in the level of confidence expressed in the views.}}, author = {{Oderud, Niklas}}, language = {{eng}}, note = {{Student Paper}}, title = {{Black-Litterman model - Sensitivity of the optimal portfolio allocation with respect to changes in the level of confidence in expressed views}}, year = {{2012}}, }