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Copyright 2003 by Goldman Sachs, Inc. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously


in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-750-4470, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., Ill River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008, e-mail: permcoordinator@wiley.com. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of diis book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult widi a professional where appropriate. Neither the publisher nor audior shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services, or technical support, please contact our Customer Care Department within the United States at 800-762-2974, outside the United States at 317-572-3993 or fax 317-572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com. Information in Chapter 30, sourced to Ibbotson Associates, was calculated by using data presented in Stocks, Bonds, Bills and Inflation 2003 Yearbook, 2003 Ibbotson Associates, Inc. Based on copyrighted works by Ibbotson and Sinquefield. All rights reserved. Used widi permission. Library of Congress Cataloging-in-Publication Data: Litterman, Robert B. Modern investment management: an equilibrium approach / Bob Litterman and the Quantitative Resources Group, Goldman Sachs Asset Management. p. cm. - (Wiley finance series) Published simultaneously in Canada. Includes bibliographical references. ISBN 0-471-12410-9 (cloth :alk. paper) 1. Investments. 2. Portfolio management. 3. Risk management. I. Goldman Sachs Asset Management Quantitative Resources Group. II. Tide. III. Series. HG4529.5.L58 2003 332.6-dc21 2002154126 Printed in the United States of America. 10 987654321