{"title":"Black–Litterman portfolio optimization based on GARCH–EVT–Copula and LSTM models","authors":"Vu Huynh, Bao Quoc Ta","doi":"10.1007/s10479-025-06597-6","DOIUrl":null,"url":null,"abstract":"<div><p>In constructing diversified portfolios, the investors might be interested in incorporating some quantifiable views or opinions. The Black–Litterman model is a useful approach to integrate investors’ views into the Markowitz allocation model. In this paper we utilize a deep learning model to estimate the investors’s views and use GARCH–EVT–Copula to model the dependence structure between stock market returns in a large portfolio. The findings show that the Black–Litterman model for portfolio optimization based on GARCH–EVT–Copula and LSTM (Long Short Term Memory) models gives better performances as compared with the traditional max-Sharpe and the original Black–Litterman portfolio problems.</p></div>","PeriodicalId":8215,"journal":{"name":"Annals of Operations Research","volume":"349 3","pages":"1693 - 1715"},"PeriodicalIF":4.5000,"publicationDate":"2025-04-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Annals of Operations Research","FirstCategoryId":"91","ListUrlMain":"https://link.springer.com/article/10.1007/s10479-025-06597-6","RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"OPERATIONS RESEARCH & MANAGEMENT SCIENCE","Score":null,"Total":0}
引用次数: 0
Abstract
In constructing diversified portfolios, the investors might be interested in incorporating some quantifiable views or opinions. The Black–Litterman model is a useful approach to integrate investors’ views into the Markowitz allocation model. In this paper we utilize a deep learning model to estimate the investors’s views and use GARCH–EVT–Copula to model the dependence structure between stock market returns in a large portfolio. The findings show that the Black–Litterman model for portfolio optimization based on GARCH–EVT–Copula and LSTM (Long Short Term Memory) models gives better performances as compared with the traditional max-Sharpe and the original Black–Litterman portfolio problems.
期刊介绍:
The Annals of Operations Research publishes peer-reviewed original articles dealing with key aspects of operations research, including theory, practice, and computation. The journal publishes full-length research articles, short notes, expositions and surveys, reports on computational studies, and case studies that present new and innovative practical applications.
In addition to regular issues, the journal publishes periodic special volumes that focus on defined fields of operations research, ranging from the highly theoretical to the algorithmic and the applied. These volumes have one or more Guest Editors who are responsible for collecting the papers and overseeing the refereeing process.