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Title: Asset allocation with multiple analysts’ views: a robust approach
Authors: Lu, I-Chen (Jennifer)
Tee, Kai-Hong
Li, Baibing
Keywords: Analysts’ recommendation
Black-Litterman model
Fuzzy logic
Portfolio selection
Robust optimisation
Issue Date: 2019
Publisher: © Springer Nature
Citation: 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.
Abstract: Retail 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.
Description: This paper is in closed access until 25th April 2020.
Version: Accepted for publication
DOI: 10.1057/s41260-019-00115-7
URI: https://dspace.lboro.ac.uk/2134/37640
Publisher Link: https://doi.org/10.1057/s41260-019-00115-7
ISSN: 1470-8272
Appears in Collections:Closed Access (Business)

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