A Simple Procedure for Merging Expert Opinions to Achieve Superior Portfolio Performance

Posted: 18 Jul 2015 Last revised: 19 Jul 2015

See all articles by Mark Davis

Mark Davis

Imperial College London

Sebastien Lleo

NEOMA Business School

Date Written: July 15, 2015

Abstract

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

Suggested Citation

Davis, Mark and Lleo, Sebastien, A Simple Procedure for Merging Expert Opinions to Achieve Superior Portfolio Performance (July 15, 2015). Journal of Portfolio Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2631239

Mark Davis

Imperial College London ( email )

South Kensington Campus
London SW7 2AZ, SW7 2AZ
United Kingdom
02075948486 (Phone)

HOME PAGE: http://www.ma.ic.ac.uk/~mdavis

Sebastien Lleo (Contact Author)

NEOMA Business School ( email )

Reims
France

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