Thesis (M.Sc.) - Cairo University - Faculty of Commerce - Department of Mathematics and Insurance

The Black-Litterman model is proposing that used expected returns in its optimization will diverge from equilibrium risk premiums in accordance with the investment manager's explicitly specified views.The Black-Litterman Asset Allocation Model is designed to provide a framework to combine investor views with market equilibrium, it proposed to modify the whole mean vector to reflect an investment manager views, Black-Litterman Asset Allocation Model is a sophisticated portfolio structure model to overcome the unintuitive problem and the highly concentrated portfolios problem. In this thesis, the researcher applied Black-Litterman model to enhance the portfolio allocation efficiency and increase the overall profitability of investment portfolio.The aim of the thesis will be to produce well-performed portfolios without requiring the investment manager to conduct expected excess returns complete set to be used as basis for portfolio allocation by incorporating a global equilibrium with an investment manager's views.The results from black litterman model were compared to the official market weighted portfolio of EGX100 Index. The Black-Litterman portfolio much outperformed the benchmark portfolio in the two proposed tests. The result is considered positive

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