lcai

The B-L model uses mkt equilibrium weights and covariance to solve for the expected return. However, the formula is not presented in the book. I don't know exactly how that's done mathematically. Once the expected returns are calculated, then they are adjusted to reflect the investor's views and the confidence level in those views. Lastly, optimization is used to calculate asset weights, just like in MV. Can anybody correct/enhance my explanation? I have to say that the B-L, re-sampling EF and other parts of asset allocation are poorly written. So confusing.