Gain-probability diagrams as an alternative to significance testing in economics and finance

David Trafimow, Ziyuan Wang, Tingting Tong and Tonghui Wang

Asian Journal of Economics and Banking, 2023, vol. 7, issue 3, 333-357

Abstract: Purpose - The purpose of this article is to show the gains that can be made if researchers were to use gain-probability (G-P) diagrams. Design/methodology/approach - The authors present relevant mathematical equations, invented examples and real data examples. Findings - G-P diagrams provide a more nuanced understanding of the data than typical summary statistics, effect sizes or significance tests. Practical implications - Gain-probability diagrams provided a much better basis for making decisions than typical summary statistics, effect sizes or significance tests. Originality/value - G-P diagrams provide a completely new way to traverse the distance from data to decision-making implications.

Keywords: Mathematical and quantitative methods; Gain-probability diagrams; Skew normal distributions; Delta skew lognormal distributions; Decision-making; Probabilities (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ajebpp:ajeb-05-2023-0045

DOI: 10.1108/AJEB-05-2023-0045

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