1992 · Financial Analysts Journal
Global Portfolio Optimization
What it asks
The source of the problem Michaud pointed at is that expected-return estimates are unreliable. Black and Litterman give up on making that estimate. They take the market's current weights as the starting point and let the investor state a view only where they disagree. With no views, the result is the market portfolio itself.
What this paper connects to
Answers · 1952
Portfolio SelectionStarts from market equilibrium instead of estimating expected returns, then layers the investor’s views on top.