New answers tagged

2

Your practical problem here is the insistence on non-negative weights, that sum to 1. There is no closed-form equation that solves this problem. However, it can be done via iterative methods. You weight each stock i by Ai that is unbounded, Its portfolio weight Wi is e(AI)/sum(e(Ai)). The weights sum to 1 and are all positive. SumW = sum(e(Ai)) dWi/dAi = Wi ...


0

Is there a way to specify BL such that asset classes without views have flexible weights? Black-Litterman has uncertainties on its views as well, so if you increase uncertainties for some highly correlated assets, the weights will be more "flexible". You probably also want to increase uncertainty in your "picked" assets where you have ...


4

Below proposition 1 (In the 2nd edition at p. 28?), at the beginning of the chapter, he specifically writes: Characteristic portfolios are not necessarily fully invested. They can include long and short positions and have significant leverage. Take the characteristic portfolio for earnings-to-price ratios. Since typical earnings-to-price ratios range ...


Top 50 recent answers are included