Consider the following Table of information Table Annual return forecasts Benchmark Index Component Variance Correlation Wp Equilibrium model expected return Stocks 0.75 0.0681 0.0289 0.3 Bonds 0.25 0.0140 0.0064 Note: The average coefficient of risk-aversion of market is 3. The variance of the equilibrium model expected returns is 10% of the sample variance. Manager's view: The manager believes that in the next month, bonds will outperform stocks by 0.5% with estimation standard error 1.73%. a) What are the advantages of the Black-Litterman model over the Markowitz model? b) In this model, how do you express the confidence of the manager in his/her view? How do you represent the managers view with error representation mathematically? Consider the following Table of information Table Annual return forecasts Benchmark Index Component Variance Correlation Wp Equilibrium model expected return Stocks 0.75 0.0681 0.0289 0.3 Bonds 0.25 0.0140 0.0064 Note: The average coefficient of risk-aversion of market is 3. The variance of the equilibrium model expected returns is 10% of the sample variance. Manager's view: The manager believes that in the next month, bonds will outperform stocks by 0.5% with estimation standard error 1.73%. a) What are the advantages of the Black-Litterman model over the Markowitz model? b) In this model, how do you express the confidence of the manager in his/her view? How do you represent the managers view with error representation mathematically