A Demystification of the Black-Litterman Model: Managing Quantitative and Traditional Portfolio Construction
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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.
KeywordsExcess Return Fund Manager Sharpe Ratio Asset Allocation Portfolio Weight
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