Knowledge Tree
Relations (1)
cross_type 2.32 — strongly supporting 4 facts
Wealthfront utilizes the Capital Asset Pricing Model (CAPM) as a foundational component in its investment methodology, specifically blending CAPM estimates with its proprietary factor models via the Black-Litterman framework as described in [1], [2], and [3]. Furthermore, [4] details the specific technical inputs Wealthfront uses to construct these CAPM-based forecasts for its asset class projections.
Facts (4)
Sources
Wealthfront Classic Portfolio Investment Methodology White Paper research.wealthfront.com 4 facts
procedureThe Capital Asset Pricing Model (CAPM) forecast used by Wealthfront is constructed based on an estimate of the global market portfolio composition, an estimate of the variance-covariance matrix of asset class returns derived from monthly historical data, and an assumed parameter measuring the risk tolerance of an average investor.
procedureWealthfront generates forecasts of long-horizon expected returns by blending the Wealthfront Factor Model with CAPM estimates using the Black-Litterman model.
procedureWealthfront constructs forward-looking projections of asset class expected returns by combining forecasts from the Capital Asset Pricing Model (CAPM) with forecasts from a proprietary multi-factor model using the Black-Litterman framework.
claimWealthfront constructs estimates of each asset class’s expected return by using the Black-Litterman model to blend expected returns from the Capital Asset Pricing Model (CAPM), as defined by William Sharpe in 1964, with long-term expectations obtained from the Wealthfront Factor Model.