Black-Litterman expected returns
Neutral expected returns combined with a view that small-cap stocks (asset 4) will outperform their neutral expected return by 10 basis points.
5 assets. Adapted from Professor Robert Stambaugh’s Finance 205/720 materials. Original example.
Adjust the assumptions and bounds below to find the portfolio that maximizes expected return minus the variance penalty. Calculations remain within the Wharton Backtester application.
Enter numerical values in decimal form: for example, enter a 4% mean return as .04, not 4.0. Initial weights must sum to 1.