Black Litterman
Black Litterman Share views online.

What we do

Bet On Views specializes in quantitative asset allocation based on investors' views. It offers an online version of the Black-Litterman model combined with Markowitz mean-variance optimization. In addition, the website offers articles and data on stock returns and statistics on investors' views.

The Black-Litterman model applied to the Dow Jones and other indices

Bet on Views makes available the Black-Litterman model on the Dow Jones, the Black-Litterman model on the SENSEX and the Black-Litterman model on the CAC40. To use the model, just enter your view on a stock by moving the corresponding slider and select your confidence level. Then watch the portfolio allocation change to reflect your view. To remove your view, click on the corresponding neutral return value.

Consensus view

Each time a user enters a view on a stock return, the view is stored in a database. This allows Bet on Views to compute an average view on stock returns and publish it in its consensus view on stock returns page. Provided there is a sufficient number of participants, Bet on Views believes the consensus view helps build common knowledge (to know that the others know too). In addition, for each stock index, the three stocks with the most activity are highlighted.

Reverse engineering

Have you ever wanted to know what a fund manager expectations really are? The portfolio reverse engineering module is a step in that direction. Enter a portfolio allocation, either as amounts or percentages, and the module automatically updates the list of stocks ordered from highest return to lowest return.

Articles on stocks

Bet on Views focuses on historical stock performance in the US in its stock returns section. It also reviews several methods for estimating stock returns and asset allocation techniques.

More on the Black-Litterman model

The idea behind the Black-Litterman model is that there are two sets of information on future stock returns: Let's start with market equilibrium. Returns on stocks depend on supply and demand in the market. The more the demand, the lesser the returns. Neutral returns are the returns that would equate supply and demand for stocks in the market if all investors had identical opinions. The CAPM (Capital Asset Pricing Model) is the general framework to do this sort of calculations. In particular, it states that the equilibrium portfolio i.e. the one that would equate supply and demand is the market portfolio.

Warren Buffet once said: "[An] investor should both own a large number of equities and space out his purchases. By periodically investing in an index fund, for example, the know-nothing investor can actually out-perform most investment professionals. Paradoxically, when "dumb" money acknowledges its limitations, it ceases to be dumb." If an investor had no clue on the stock market, the market portfolio would be a reasonable starting point.

Now, an investor may have views. He can be bullish or bearish regarding the future returns of Stock A. He may feel that stock B should outperform stock C or that the market as a whole is overpriced. Bet On Views allows investors to factor in such views. Meanwhile, investors are not required to indicate a set of views on all stocks. If an investor expresses a bullish view on a stock, the portfolio weight of this stock increases. In general, this will also affect the expected returns and allocation of others shares in the portfolio.

The Black and Litterman model determines the expected stock returns that are the most consistent with the two sets of information. Since market based information or investors' views are uncertain, this uncertainty is also taken into account in the model.

As the investors express their views, Bet On Views determines the Black-Litterman expected returns and performs a special Markowitz Portfolio Optimization. Please note that in the current version shorting/short-selling is allowed. The criterium used in the Markowitz Portfolio Optimization is the maximization of the Sharpe ratio: expected returns/standard deviation. This simply means that you get paid the most possible amount by unit of risk, risk being measured by standard deviation.