The dynamic Black-Litterman approach to asset allocation

Harris, R.D.F., Stoja, E. and Tan, L. ORCID: 0000-0001-6986-1923, 2017. The dynamic Black-Litterman approach to asset allocation. European Journal of Operational Research, 259 (3), pp. 1085-1096. ISSN 0377-2217

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Abstract

We generalise the Black-Litterman (BL) portfolio management framework to incorporate time-variation in the conditional distribution of returns in the asset allocation process. We evaluate the performance of the dynamic BL model using both standard performance ratios as well as other measures that are designed to capture tail risk in the presence of non-normally distributed asset returns. We find that the dynamic BL model outperforms a range of different benchmarks. Moreover, we show that the choice of volatility model has a considerable impact on the performance of the dynamic BL model.

Item Type: Journal article
Publication Title: European Journal of Operational Research
Creators: Harris, R.D.F., Stoja, E. and Tan, L.
Publisher: Elsevier
Date: 16 June 2017
Volume: 259
Number: 3
ISSN: 0377-2217
Identifiers:
NumberType
10.1016/j.ejor.2016.11.045DOI
Divisions: Schools > Nottingham Business School
Record created by: Linda Sullivan
Date Added: 04 Jan 2017 10:25
Last Modified: 07 Jun 2019 15:16
URI: http://irep.ntu.ac.uk/id/eprint/29556

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