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I was wondering what portfolio optimisation is used by professionals. I know about these 3:

  • Mean-variance
  • Black-Litterman
  • Kelly Criterion

Which one is preferred? Is there some other more robust method?

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  • $\begingroup$ All three are used, though they all suffer from the problem that the inputs (such as expected returns and covariances) are difficult to estimate with any precision in real life. (At least Black Litterman attempts to take this issue (input uncertainty) into account). $\endgroup$
    – nbbo2
    Apr 4, 2022 at 18:59
  • $\begingroup$ Which one should one choose though? What are the pros and cons? $\endgroup$ Apr 5, 2022 at 10:08

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