Black–Litterman model

In finance, the Black–Litterman model is a mathematical model for portfolio allocation developed in 1990 at Goldman Sachs by Fischer Black and Robert Litterman, and published in 1992. It seeks to overcome problems that institutional investors have encountered in applying modern portfolio theory in practice. The model starts with the equilibrium assumption that the asset allocation of a representative agent should be proportional to the market values of the available assets, and then modifies that to take into account the 'views' (i.e., the specific opinions about asset returns) of the investor in question to arrive at a bespoke asset allocation. In finance, the Black–Litterman model is a mathematical model for portfolio allocation developed in 1990 at Goldman Sachs by Fischer Black and Robert Litterman, and published in 1992. It seeks to overcome problems that institutional investors have encountered in applying modern portfolio theory in practice. The model starts with the equilibrium assumption that the asset allocation of a representative agent should be proportional to the market values of the available assets, and then modifies that to take into account the 'views' (i.e., the specific opinions about asset returns) of the investor in question to arrive at a bespoke asset allocation.