For just the fourth time since the election, the SPY has closed below the 20 day support level - which has been rock solid until now. There is a good size gap to the next support level with the 50 day currently at $232. It will be interesting to see if the market finally gets a little volatility for the first time since October/November.
"The 'radical' of one century is the 'conservative' of the next." -Mark Twain In this series, I'm going to explore some of the advances in portfolio management, construction, and modeling since the advent of Harry Markowitz's Nobel Prize winning Modern Portfolio Theory (MPT) in 1952. MPT's mean-variance optimization approach shaped theoretical asset allocation models for decades after its introduction. However, the theory failed to become an accepted industry practice, so we'll explore why that is and what advances have developed in recent years to address the shortcomings of the original model. The Black-Litterman Formula The Black-Litterman formula incorporates two distinct inputs; the first is the Implied Equilibrium Return Vector we constructed in Part 1, the second is a series of vectors and matrices that incorporate a manager's views/forecasts of the market. The product of the formula is an updated Combined Expected Excess Return ...
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