Improved Moment-Estimation Formulas Using More Than Three Subjective Fractiles

Hon-Shiang Lau, Amy Hing-Ling Lau and Chrwan-Jyh Ho
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Hon-Shiang Lau: College of Business Administration, Oklahoma State University, Stillwater, Oklahoma 74074
Amy Hing-Ling Lau: College of Business Administration, Oklahoma State University, Stillwater, Oklahoma 74074
Chrwan-Jyh Ho: College of Business Administration, Oklahoma State University, Stillwater, Oklahoma 74074

Management Science, 1998, vol. 44, issue 3, 346-351

Abstract: PERT-type subjective estimations are used in many stochastic decision models to estimate the random variables' mean and standard deviation (s.d.). The approach is based on the beta-distribution assumption; also, most PERT-type formulas use only three estimated fractiles. We point out that: (i) it is desirable to consider a substantially richer set of distributions than the beta in developing PERT-type formulas; (ii) it may be beneficial to use more than three fractile-estimates in PERT-type formulas. We then develop formulas for estimating the mean and s.d. that are based on a substantially richer set of distributions than the beta and that use more than three estimated fractiles. These formulas perform better than the best currently-available formulas when the subjective distribution is not restricted to be beta.

Keywords: Moment Estimation; Mean Estimation; Standard Deviation Estimation; Subjective Fractiles (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (13)

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