I implemented exactly this methodology for an asset manager back in 2011. I just had a job interview and the guy on the phone asked me about it. I mentioned everything as it stands in this video. This is exactly the way it was implemented. We had the views, we included confidence levels. This video is great! The problem: the guy asked me for the formula claiming that it was easy. Easy?. Lol. On 2:56 @Phil says that it's complicated. Of course it is. Anyways, just a pointer for those who may be learning this stuff: Usually, asset managers don't include particular vies of stocks. They have more views on asset classes. So Europe will outperform Emerging markets by 1%. Value will outperform Growth, and such. The confidence levels here work like a charm too. Just make sure if you want to change your confidence level that they are close to the values recommended by Black and Litterman.
Phil Davies ! You are my hero ! Thank you so much for this video. I have some questions. If I was thinking to incorporate views of analysts from tipranks for example what values should I use for confidence levels? Their win rate? What if I used analyst consensus as a view what would be confidence level in this case? Thank you
Hello Phil, I have a short question. In the first overall B/L-formula is a tau in front of the covarianzmatrix. In the formula of OMEGA is also a tau. I do not understand why this should be the same scalar... I thought, that the scalar in the OMEGA is for showing the level of uncertainty and the tau in the overall formula is to show the uncertainty about the equilibrium returns? Thanks!
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I implemented exactly this methodology for an asset manager back in 2011. I just had a job interview and the guy on the phone asked me about it. I mentioned everything as it stands in this video. This is exactly the way it was implemented. We had the views, we included confidence levels. This video is great!
The problem: the guy asked me for the formula claiming that it was easy. Easy?. Lol. On 2:56 @Phil says that it's complicated. Of course it is.
Anyways, just a pointer for those who may be learning this stuff: Usually, asset managers don't include particular vies of stocks. They have more views on asset classes. So Europe will outperform Emerging markets by 1%. Value will outperform Growth, and such. The confidence levels here work like a charm too. Just make sure if you want to change your confidence level that they are close to the values recommended by Black and Litterman.
Great set of videos on portfolio theory. Thanks for posting, Phil.
Thank you! Your video series has been immensely helpful.
Phil Davies ! You are my hero ! Thank you so much for this video. I have some questions.
If I was thinking to incorporate views of analysts from tipranks for example what values should I use for confidence levels? Their win rate? What if I used analyst consensus as a view what would be confidence level in this case? Thank you
Thank you so much Mr. Davies.
Great video, well explained.
Bravo
Hello Phil,
I have a short question. In the first overall B/L-formula is a tau in front of the covarianzmatrix. In the formula of OMEGA is also a tau. I do not understand why this should be the same scalar... I thought, that the scalar in the OMEGA is for showing the level of uncertainty and the tau in the overall formula is to show the uncertainty about the equilibrium returns?
Thanks!
nice!!! good!!!
why is this formula so different from the previous video? I dont even see the similarity for just the implied excess returns
You saved my exam!
awesome~thank you.
Can i get the spread sheet plz
can u please send the script of this ppt. i need to copy for my assignment.