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Anonymous - 07/25/2008 - 17:00 - 0 comments - 0 attachments
The financial portfolio model often referred to as the Black-Litterman model is analyzed using two approaches; a mathematical and a behavioral finance approach. After a detailed description of its framework, the Black-Litterman model is derived mathematically using a sampling theoretical approach. This approach generates a new interpretation of the model and gives an interpretable formula for the mystical parameter ? , the weight-on-views. Secondly, implications are drawn from research results within behavioral finance. One of the most interesting features of the Black-Litterman model is that the benchmark portfolio, against which the performance of the portfolio manager is evaluated, functions as the point of reference. According to behavioral finance, the actual utility function of the investor is reference-based and investors estimate losses and gains in relation to this benchmark. Implications drawn from research results within behavioral finance indicate and explain why the portfolio output given by the Black-Litterman model appears more intuitive to fund managers than portfolios generated by the Markowitz model.
Another feature of the Black-Litterman model is that the user assigns levels of confidence to each asset view in the form of confidence intervals. Research results within behavioral finance have, however, shown that people tend to be badly calibrated when estimating their levels of confidence. Research has shown that people are overconfident in financial decision-making, particularly when stating confidence intervals. This is problematic. For a deeper understanding of the use of the Black-Litterman model it seems that we should turn to those financial fields in which social and organizational context and issues are taken into consideration, to generate better knowledge of the use of the Black-Litterman model.
Early in the 20th century, diabetes mellitus was considered to be a rare medical condition in African countries, and mostly in sub-Saharan Africa. Over the past 30 or 40 years however, the situation has changed. Diabetes is now regarded as a major public health problem throughout Africa particularly among urban communities. The disease is little understood in the general population and is often poorly detected. Previous research, for example, shows about 50 percent of people with type 2 diabetes mellitus in Tanzania are unaware of their condition and more than 80 percent diabetes cases are undiagnosed.
The relationship between reproductive success, vegetation types in the home range, and diet composition and nutritional quality was examined in female Roosevelt elk on the Olympic Peninsula, Washington. Nine elk herds were radio tracked during 2001 to quantify reproductive success (as calf:cow ratio), home range size and location, and vegetation types used. I measured diet composition from fecal samples, and collected plant samples of forages found in the diet. I analyzed plant samples for nutritional quality (protein content, digestibility, and energy).
Herds were grouped into highly productive (December calf:cow ratio > 0.30) and less productive (December calf:cow ratio < 0.30). Highly productive herds had more 2 – 9 year old timber (P = 0.03) and less 11 – 24 year old timber (P = 0.03) available in the home range than less productive herds. Highly productive herds consumed more grasses (P = 0.008) and less shrubs (P = 0.02) and ferns (P = 0.02) than less productive herds. In addition, I found negative correlations between percentage grass or forb in the diet and percentage shrub or fern in the diet. Percentage shrub in the diet was positively correlated to percentage 20 – 24 year old timber, and negatively correlated to percentage 2 – 9 year old timber available in the home range.
