A novel integration of the Fama–French and Black–Litterman models to enhance portfolio management

IF 5.4 2区 经济学 Q1 BUSINESS, FINANCE
Hyungjin Ko , Bumho Son , Jaewook Lee
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引用次数: 0

Abstract

We propose a novel portfolio model integrating the Fama–French three-factor model into the Black–Litterman framework, enabling efficient investment strategies. The model surpasses traditional benchmarks, significantly increasing alpha, minimizing estimation error, and improving diversification. Performance improvements are shown by a tripled Sharpe ratio and doubled Certainty Equivalent Return compared to standard models. It maintains stability across different parameters and economic climates, leveraging improved weight adjustment to reduce estimation errors and withstand market volatility. It provides a new perspective for portfolio construction, leveraging long-term insights from asset pricing theory with significant implications.

法马-弗伦奇模型和布莱克-利特曼模型的新整合,以加强投资组合管理
我们提出了一种新的投资组合模型,将法玛-弗伦奇三因子模型整合到布莱克-利特曼框架中,从而实现了高效的投资策略。该模型超越了传统基准,显著提高了阿尔法,最小化了估计误差,并改善了多样化。与标准模型相比,该模型的夏普比率提高了三倍,确定性等价收益率提高了一倍,从而显示出其性能的提高。它能在不同参数和经济环境下保持稳定,利用改进的权重调整来减少估计误差,抵御市场波动。它利用资产定价理论的长期见解,为投资组合构建提供了新的视角,具有重大意义。
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来源期刊
CiteScore
6.60
自引率
10.00%
发文量
142
期刊介绍: International trade, financing and investments, and the related cash and credit transactions, have grown at an extremely rapid pace in recent years. The international monetary system has continued to evolve to accommodate the need for foreign-currency denominated transactions and in the process has provided opportunities for its ongoing observation and study. The purpose of the Journal of International Financial Markets, Institutions & Money is to publish rigorous, original articles dealing with the international aspects of financial markets, institutions and money. Theoretical/conceptual and empirical papers providing meaningful insights into the subject areas will be considered. The following topic areas, although not exhaustive, are representative of the coverage in this Journal. • International financial markets • International securities markets • Foreign exchange markets • Eurocurrency markets • International syndications • Term structures of Eurocurrency rates • Determination of exchange rates • Information, speculation and parity • Forward rates and swaps • International payment mechanisms • International commercial banking; • International investment banking • Central bank intervention • International monetary systems • Balance of payments.
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