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An application of the Black–Litterman model with EGARCH-M-derived views for international portfolio management

  • Steven Beach

    ()

  • Alexei Orlov

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. Copyright Swiss Society for Financial Market Research 2007

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File URL: http://hdl.handle.net/10.1007/s11408-007-0046-6
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Article provided by Springer in its journal Financial Markets and Portfolio Management.

Volume (Year): 21 (2007)
Issue (Month): 2 (June)
Pages: 147-166

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Handle: RePEc:kap:fmktpm:v:21:y:2007:i:2:p:147-166
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  1. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October.
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  9. Geert Bekaert & Campbell R. Harvey, 1995. "Emerging Equity Market Volatility," NBER Working Papers 5307, National Bureau of Economic Research, Inc.
  10. Manuel Ammann & Michael Verhofen, 2006. "The Effect of Market Regimes on Style Allocation," Financial Markets and Portfolio Management, Springer, vol. 20(3), pages 309-337, September.
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