Evaluation of Asset Allocation Models

Abstract

The main goal of investors is to minimize risk at any point of a given
returns or/and maximize returns at any given risk. Asset allocation
involves allotting investments among different assets. Optimal asset
allocation minimizes risk of portfolio to the barest level and
maximizes returns better. The aim of this paper is to investigate the
two asset allocations; Black Litterman model (BLM) and Mean
Variance model (MVM) and examine the model that minimizes risk
better and maximizes return optimally. The data used are monthly
data of groundnut oil, palm oil and palm kernel. The study shows that
the BLM minimizes risk of portfolio better and maximizes return
optimally than MVM.