Country Returns Equilibriui United States 3.64% -0.36% United Kingdom 2.61 -0.36 Japan 2.34 -0.23 France 3.38 -0.51 Switzerland 2.46 -0.37 Germany 3.93 -0.68 Netherlands 3.20 -0.49 Canada 2.88 -0.32 Italy 3.02 -0.49 Australia 1.34 -0.15 Spain 3.27 -0.50 Sweden 4.46 -0.63 Hong Kong 2.47 -0.33 Finland 6.17 -0.81 Belgium 1.91 -0.30 Singapore 2.26 -0.30 Denmark 1.93 -0.26 Ireland 2.20 -0.32 Norway 2.04 -0.28 Portugal 1.63 -0.27 Greece 2.03 -0.29 Austria 0.60 -0.10 New Zealand 0.75 -0.10 contrast to the traditional approach, the Black-Litterman model adjusts all of the expected returns away from their starting values in a manner consistent with the views being expressed. Because the view expressed here is bearish on German equities, the expected returns on German equities decline. The total adjustment away from equilibrium is 68 basis points, less than the 80 basis points expressed in the view. This result reflects the assumption that the view has some uncertainty associated with it. The equilibrium is given some weight as well and acts as a center of gravity, pulling the Black-Litterman expected returns away from the view itself, back toward the equilibrium values. Suppose we add another view. This time let us specify that a portfolio long 100 percent of Japanese equity and short 100 percent of U.K. equity will have a positive expected excess return of 100 basis points. We also give this view a confidence of 4 and assume that its error is uncorrelated with that of the previous view. The unconstrained Black-Litterman optimal portfolio given these two views is shown in Table 7.7. We can see that the deviations of the optimal portfolio from equilibrium weights are exactly proportional to the sum of the two view portfolios. This result illustrates a very important general property of the Black-Litterman model. In general, the unconstrained optimal portfolio from the Black-Litterman