Enhancing Black-Litterman Portfolio via Hybrid Forecasting Model Combining Multivariate Decomposition and Noise Reduction

The sensitivity to input parameters and lack of flexibility limits the traditional Mean-Variance model. In contrast, the Black-Litterman model has attracted widespread attention by integrating market equilibrium returns with investors' subjective views. This paper proposes a novel hybrid deep learning model combining Singular Spectrum analysis (SSA), Multivariate Aligned Empirical Mode Decomposition (MA-EMD), and Temporal Convolutional Networks (TCNs), aiming to improve the prediction accuracy of asset prices and thus enhance the ability of the Black-Litterman model to generate subjective views. Experimental results show that noise reduction pre-processing can improve the model's accuracy, and the prediction performance of the proposed model is significantly better than that of three multivariate decomposition benchmark models. We construct an investment portfolio by using 20 representative stocks from the NASDAQ 100 index. By combining the hybrid forecasting model with the Black-Litterman model, the generated investment portfolio exhibits better returns and risk control capabilities than the Mean-Variance, Equal-Weighted, and Market-Weighted models in the short holding period.