Artificial Intelligence generated views on the Black-Litterman model
👨💻 Work in Progress 👨💻
The development of new technologies is challenging traditional asset allocation models used in the asset management industry. Black and Litterman developed one of the most applied quantitative asset allocation models that combines the market equilibrium implied returns with investor generated views.
This study aims to investigate if we can add value to the model through artificial-intelligence generated views. Based on a review of multiple machine learning models, we decided to forecast the expected returns through a neural network model and backtested it versus the market-implied returns to check for the significance of the generated views.