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I am required by my course to write a small paper on the Bayesian approach to portfolio optimization, I am following Applied statistical decision theory [by] Raiffa, Howard. Which can be consulted online here.

I begun following this text because I tried to read the paper by Zellner, Arnold, and V. Karuppan Chetty, 1965, Prediction and decision problems in regression models from the Bayesian point of view, and realized I was not following most of the math present in the paper.

My questions are: What is the recommended literature for understanding the Bayesian approach to portfolio management? any suggestions on the approach to the subject?

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An introductory presentation by Michael Brandt from a seminar of Inquire Europe is Bayesian Portfolio Construction. His review Portfolio Choice Problems has a section on decision theory which could also be useful to you.

Another good choice is Attilio Meucci's Risk and Asset Allocation book which contains a whole chapter (ch 9) on Bayesian techniques in asset allocation. You might also want to look at his paper The Black Litterman Approach: Original Model and Extensions, which reviews Black Litterman, the most widely used Bayesian approach in asset allocation.

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As you are especially interested in applications in Finance I'll recommend this book of Rachev which focus on Bayesian Methods in Finance

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