Portfolio selectıon and return performance: an application of the black-litterman method in the Istanbul stock exchange

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2011

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Bozdemir, Mehmet Burak

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An Application of the Black-Litterman Method in the Istanbul Stock Exchange Bozdemir, Mehmet Burak M.Sc, Department of Financial Mathematics Supervisor : Assist. Prof. Dr. Seza DanıĢoğlu September 2011, 58 pages In this study, Black-Litterman method is examined, and an emprical study is conducted for Turkish Stock Market, using Black-Litterman method with quantitative views. As the quantitative model, AR(1) model is selected to generate the investor views. Expected returns implied by the Capital Asset Pricing Model (CAPM) is blended with the expected returns forecasted by AR(1) model. The performance of the resulting Black-Litterman portfolio is compared with the performance of the market portfolio. It is found that the Black-Litterman portfolio, with views coming from AR(1) model, does not perform better than the market portfolio. However, the difference between the two strategies is not found to be statistically significant.

Subject Keywords

Banks and banking., Sovereign wealth funds., Investments, Foreign., Portfolio management., Risk management.

URI

http://etd.lib.metu.edu.tr/upload/12613877/index.pdf
https://hdl.handle.net/11511/20775

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Graduate School of Applied Mathematics, Thesis

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Citation Formats

M. B. Bozdemir, “Portfolio selectıon and return performance: an application of the black-litterman method in the Istanbul stock exchange,” M.S. - Master of Science, Middle East Technical University, 2011.