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Applying the Black-Litterman Model on the Swedish Stock Market

Arestad, Carl-Johan LU and Rahmqvist, Johan LU (2012) NEKP02 20121
Department of Economics
Abstract (Swedish)
This thesis investigates the applicability of the Black-Litterman portfolio allocation model on the Swedish stock market for the time period January 2008 to April 2012 and aims to bring clarity to the implementation process of the model. We also implement a new estimation approach for the confidence in analyst views. The portfolio of 36 companies used in the research was selected in order to benchmark against the Nordea Sverigefond. Also a Mean-Variance portfolio will be used for comparison purposes. Both a restricted and an unrestricted version of the Black-Litterman model are used in order to test differences in outcome when short selling is allowed. Results indicate that that the restricted model is more suitable than the unrestricted.... (More)
This thesis investigates the applicability of the Black-Litterman portfolio allocation model on the Swedish stock market for the time period January 2008 to April 2012 and aims to bring clarity to the implementation process of the model. We also implement a new estimation approach for the confidence in analyst views. The portfolio of 36 companies used in the research was selected in order to benchmark against the Nordea Sverigefond. Also a Mean-Variance portfolio will be used for comparison purposes. Both a restricted and an unrestricted version of the Black-Litterman model are used in order to test differences in outcome when short selling is allowed. Results indicate that that the restricted model is more suitable than the unrestricted. However we find no significant differences in the performance of our benchmark portfolio and the Black-Litterman portfolio. We also find results that indicate longer positions in assets were the level of confidence is higher. (Less)
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author
Arestad, Carl-Johan LU and Rahmqvist, Johan LU
supervisor
organization
course
NEKP02 20121
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Black-Litterman, Mean-Variance, views, portfolio allocation, portfolio weights
language
English
id
2733863
date added to LUP
2012-06-08 14:57:32
date last changed
2012-06-08 14:57:32
@misc{2733863,
  abstract     = {This thesis investigates the applicability of the Black-Litterman portfolio allocation model on the Swedish stock market for the time period January 2008 to April 2012 and aims to bring clarity to the implementation process of the model. We also implement a new estimation approach for the confidence in analyst views. The portfolio of 36 companies used in the research was selected in order to benchmark against the Nordea Sverigefond. Also a Mean-Variance portfolio will be used for comparison purposes. Both a restricted and an unrestricted version of the Black-Litterman model are used in order to test differences in outcome when short selling is allowed. Results indicate that that the restricted model is more suitable than the unrestricted. However we find no significant differences in the performance of our benchmark portfolio and the Black-Litterman portfolio. We also find results that indicate longer positions in assets were the level of confidence is higher.},
  author       = {Arestad, Carl-Johan and Rahmqvist, Johan},
  keyword      = {Black-Litterman,Mean-Variance,views,portfolio allocation,portfolio weights},
  language     = {eng},
  note         = {Student Paper},
  title        = {Applying the Black-Litterman Model on the Swedish Stock Market},
  year         = {2012},
}