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
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
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