Asked by richard chiem on May 01, 2024
Verified
The ____________ model allows the private views of the portfolio manager to be incorporated with market data in the optimization procedure.
A) Black-Litterman
B) Treynor-Black
C) Treynor-Mazuy
D) Black-Scholes
Black-Litterman Model
A portfolio allocation model that combines expected returns based on equilibrium assumptions with the views of an investor.
Portfolio Manager
A professional responsible for making investment decisions and overseeing a portfolio of assets to achieve the investment objectives of their clients or institution.
- Identify the role of the Black-Litterman model in incorporating private views with market data for portfolio optimization.
Verified Answer
MV
Matthijs VaessenMay 03, 2024
Final Answer :
A
Explanation :
The Black-Litterman model is designed to incorporate the private views of the portfolio manager along with the market equilibrium data (such as the expected returns based on the Capital Asset Pricing Model) in the portfolio optimization process. This helps in overcoming some of the unrealistic assumptions of traditional Markowitz portfolio theory by allowing for more realistic, personalized input.
Learning Objectives
- Identify the role of the Black-Litterman model in incorporating private views with market data for portfolio optimization.