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A Demystification of the Black-Litterman Model: Managing Quantitative and Traditional Portfolio Construction

  • Stephen Satchell
  • Alan Scowcroft
Chapter

Abstract

One of the major difficulties in financial management is trying to integrate quantitative and traditional management into a joint framework. Typically, traditional fund managers are resistant to quantitative management, as they feel that techniques of mean-variance analysis and related procedures do not capture effectively their value added. Quantitative managers often regard their judgmental colleagues as idiot savants. Senior management is rarely prepared to intervene when managers are successful and profitable, however they made their decisions. These disharmonies can make company-wide risk-management and portfolio analysis non-operational and can have deleterious effects on company profitability and staff morale.

Keywords

Excess Return Fund Manager Sharpe Ratio Asset Allocation Portfolio Weight 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© The Editor(s) 2016

Authors and Affiliations

  • Stephen Satchell
    • 1
    • 2
    • 3
    • 4
  • Alan Scowcroft
    • 5
  1. 1.Trinity CollegeCambridge UniversityCambridgeUK
  2. 2.Trinity CollegeCambridgeUK
  3. 3.Cambridge UniversityUK
  4. 4.City University Business SchoolLondonUK
  5. 5.UBS WarburgUK

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