Investopedia

Continue to Site »

Black-Litterman Model

Filed Under » , , , ,
Dictionary Says

Definition of 'Black-Litterman Model'

An asset allocation model that was developed by Fischer Black and Robert Litterman of Goldman Sachs. The Black-Litterman model is essentially a combination of two main theories of modern portfolio theory, the Capital Asset Pricing Model (CAPM) and Harry Markowitz's mean-variance optimization theory.
Investopedia Says

Investopedia explains 'Black-Litterman Model'

The main benefit of the Black-Litterman model is that it allows the portfolio manager to use it as a tool for producing a set of expected returns within the mean-variance optimization framework. This can allow the manager to avoid certain problems or issues inherent in Markowitz's mean-variance optimization framework, such as the concentration of portfolio assets in only a handful of the assets under optimization.

Articles Of Interest

  1.

    Volatility - The Birth Of A New Asset Class

    Learn more about the trading possibilities with the VIX.

  2. The Capital Asset Pricing Model: An Overview

    CAPM helps you determine what return you deserve for putting your money at risk.

  3. Understanding Option Pricing

    Take advantage of stock movements by getting to know these derivatives.

  4. Investing In REITs Instead Of Property

    Learn why this one particular REIT is a better investment than holding physical property in your retirement portfolio.

  5. Examples Of Asset/Liability Management

    In its simplest form, asset/liability management entails managing assets and cash inflows to satisfy various obligations; however, it's rarely that simple.

  6. Multi-Asset Funds Or Your Own Mix?

    The underlying concept of mixed funds is very appealing. Discover if you're better off with professional management or creating a mixed fund of your own.

  7. How To Adjust Your Portfolio In A Bear Or Bull Market

    While investors shouldn’t feel compelled to change their portfolios radically overnight in reaction to the market's daily moves, small adjustments in the face of a bull or bear market could be ...

  8. The Truth Behind Tactical ETF Investing

    Are tactical ETFs reasonable and effective investment strategies or just plain speculative behavior?

  9. 6 Popular ETF Types For Your Portfolio

    Exchange traded funds are an extremely popular diversification tool that can protect your portfolio during troubled periods.

  10. Economic Indicators That Affect The U.S. Stock Market

    Macroeconomic factors like GDP, Inflation, and Retail Sales affect the value of your portfolio. Understanding these economic indicators is vital for every investor in the marketplace.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  2. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  3. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.

  4. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.

  5. Angelina Jolie Stock Index

    An index made up of a selection of stocks from companies associated with actress Angela Jolie.

  6. Consequential Loss

    The amount of loss incurred as a result of being unable to use business property or equipment.
Trading Center