A Simple Procedure for Merging Expert Opinions to Achieve Superior Portfolio Performance
Posted: 18 Jul 2015 Last revised: 19 Jul 2015
Date Written: July 15, 2015
In this paper, the authors describe a simple procedure for blending statistical estimates with expert opinions to produce a forward-looking view of the performance of assets. They discuss the impact of behavioural biases on the views and propose general modelling principles to biases. Standard linear filtering techniques play a leading role in our approach. Filtering blends statistical estimates and expert opinions seamlessly, while opening the way to the application of dynamic portfolio optimisation techniques.
Keywords: portfolio selection, expert opinion, behavioural finance, Black-Litterman, Kalman filter, benchmarked asset management, Asset and Liability Management, stochastic programming, stochastic control.
JEL Classification: C11, C13, C61, G11
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