65 Pages Posted: 28 Jan 2009 Last revised: 23 Jun 2014
Date Written: June 20, 2014
In this paper we survey the literature on the Black-Litterman model. This survey is provided both as a chronology and a taxonomy as there are many claims on the model in the literature. We provide a complete description of the canonical model including full derivations from the underlying principles using both Theil's Mixed Estimation model and Bayes Theory. The various parameters of the model are considered, along with information on their computation or calibration. Further consideration is given to several of the key papers, with worked examples illustrating the concepts.
Keywords: quantitative portfolio management, asset allocation, Black-Litterman, mixed-estimation
JEL Classification: C11, G11
Suggested Citation: Suggested Citation