I know there are two ways to optimize portfolio. What are the limitations and advantages by using Black Litterman over Mean variance.

  • $\begingroup$ There are no advantages. It's an old outdated model that probably no one uses in industry. Giving an investor the ability to include their own views on what they think assets will do doesn't make a model any better. It could make it much worse $\endgroup$
    – develarist
    Commented Nov 20, 2020 at 2:19
  • $\begingroup$ This question is answered by the Wikipedia entry en.wikipedia.org/wiki/Black%E2%80%93Litterman_model under 'Background'. BL provides a more complicated but better way to specify Expected Returns. Errors in expected returns are a major problem for practical application of MVO. The careful, 2 step process in BL can help come up with better solution. $\endgroup$
    – nbbo2
    Commented Nov 20, 2020 at 13:05
  • 1
    $\begingroup$ If someone is using BL, they are using it as a complement to MVO (or any other portfolio optimization method), not instead of $\endgroup$
    – amdopt
    Commented Nov 20, 2020 at 14:18
  • $\begingroup$ @develarist Thanks very much for you help, could you please shed me some light about what model is popular if not the most in industry ? $\endgroup$
    – Guifan Li
    Commented Nov 20, 2020 at 15:26
  • $\begingroup$ Some good leads here: quant.stackexchange.com/questions/49869/… $\endgroup$
    – develarist
    Commented Nov 20, 2020 at 16:09


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