The Black-Litterman Approach and Views from Predictive Regressions: Theory and Implementation

摘要

The Black-Litterman approach has become a popular method of asset allocation. It involves taking into account an investor’s subjective views in determining portfolio construction. In an interview with Institutional Investor Journals. Katarina Lucivjanska of Pavol Jozef Safarik University in Kosice, Slovakia, explains how combining the Black-Litterman model with predictive regressions can improve returns. Using specific market data such as price-to-eamings ratios or dividend yields as a basis for one’s subjective views about future market returns can lead to enhanced results.