How does Black Litterman work?

classes, generate, expected, efficient

This may be out of scope for the exam, but the book does not explain it well. From my understanding, you take a diversified index, use the weightings, combine it with your expectations for various asset classes, and have it spit out an expected return number. The results from this are then used in a mean variance analysis to generate an efficient frontier.

Is that correct?

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发表于 2011-7-11 19:16 | 只看该作者

bpdulog Wrote:
-------------------------------------------------------
> This may be out of scope for the exam, but the
> book does not explain it well. From my
> understanding, you take a diversified index, use
> the weightings, combine it with your expectations
> for various asset classes, and have it spit out an
> expected return number. The results from this are
> then used in a mean variance analysis to generate
> an efficient frontier.
>
>
> Is that correct?

I believe so

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