An Application of the Black-Litterman Model with EGARCH-M-Derived Views for International Portfolio Management

Financial Markets and Portfolio Management, Vol. 21, No. 2, pp. 147-166, 2007

Posted: 16 May 2007

See all articles by Steven L. Beach

Steven L. Beach

Radford University - Department of Accounting, Finance & Business Law; Radford University - College of Business and Economics

Alexei G. Orlov

Securities and Exchange Commission

Abstract

This paper provides an application of the Black-Litterman methodology to portfolio management in a global setting. The novel feature of this paper relative to the extant literature on Black-Litterman methodology is that we use GARCH-derived views as an input into the Black-Litterman model. The returns on our portfolio surpass those of portfolios that rely on market equilibrium weights or Markowitz-optimal allocations. We thereby illustrate how the Black-Litterman model can be put to work in designing global investment strategies.

Keywords: Black-Litterman, GARCH, Global portfolio management

JEL Classification: G11, G15

Suggested Citation

Beach, Steven L. and Orlov, Alexei G., An Application of the Black-Litterman Model with EGARCH-M-Derived Views for International Portfolio Management. Financial Markets and Portfolio Management, Vol. 21, No. 2, pp. 147-166, 2007, Available at SSRN: https://ssrn.com/abstract=986869

Steven L. Beach (Contact Author)

Radford University - Department of Accounting, Finance & Business Law ( email )

Whitt Hall
College of Business and Economics
Radford, VA 24142-6951
United States
540-831-5087 (Phone)

HOME PAGE: http://www.radford.edu/~slbeach

Radford University - College of Business and Economics

United States
540-831-5087 (Phone)

HOME PAGE: http://www.radford.edu/~slbeach

Alexei G. Orlov

Securities and Exchange Commission ( email )

100 F Street NE
Washington, DC 20549
United States

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