On Adaptive Portfolio Management with Dynamic Black-Litterman Approach

Abstract

This paper presents a novel framework for adaptive portfolio management that combines a dynamic Black-Litterman optimization with the general factor model and Elastic Net regression. This integrated approach allows us to systematically generate investors' views and mitigate potential estimation errors. Our empirical results demonstrate that this combined approach can lead to computational advantages as well as promising trading performances.Comment: 9 pages, 6 figure