JAM expert views.pdf (497.8 kB)
Asset allocation with multiple analysts’ views: a robust approach
journal contribution
posted on 2019-04-25, 10:21 authored by I-Chen (Jennifer) Lu, Kai-Hong TeeKai-Hong Tee, Baibing LiBaibing LiRetail investors often make decisions based on professional analysts’ investment recommendations.
Although these recommendations contain up-to-date financial information, they are usually expressed
in sophisticated but vague forms. In addition, the quality differs from analyst to analyst and
recommendations may even be mutually conflicting. This paper addresses these issues by extending the
Black-Litterman (BL) method, and developing a multi-analyst portfolio selection method, balanced
against any over-optimistic forecasts. Our methods accommodate analysts’ ambiguous investment
recommendations and the heterogeneity of data from disparate sources. We prove the validity of our
model, using an empirical analysis of around 1000 daily financial newsletters collected from two top10 Taiwanese brokerage firms over a two-year period. We conclude that analysts’ views contribute to
the investment allocation process and enhance the portfolio performance. We confirm that the degree
of investors’ confidence in these views influences the portfolio outcome, thus extending the idea of the
BL model and improving the practicality of robust optimisation.
History
School
- Business and Economics
Department
- Business
Published in
Journal of Asset ManagementVolume
20Issue
3Pages
215–228Citation
LU, I-C., TEE, K-H. and LI, B., 2019. Asset allocation with multiple analysts’ views: a robust approach. Journal of Asset Management, 20(3), pp, 215–228.Publisher
Palgrave Macmillan © Springer NatureVersion
- AM (Accepted Manuscript)
Publisher statement
This is a post-peer-review, pre-copyedit version of an article published in Journal of Asset Management. The definitive publisher-authenticated version LU, I-C., TEE, K-H. and LI, B., 2019. Asset allocation with multiple analysts’ views: a robust approach. Journal of Asset Management, 20(3), pp, 215–228, https://doi.org/10.1057/s41260-019-00115-7 is available online at: https://link.springer.com/article/10.1057/s41260-019-00115-7.Acceptance date
2019-03-04Publication date
2019-04-03Copyright date
2019ISSN
1470-8272eISSN
1479-179XPublisher version
Language
- en