Deciding with Judgment

Simone Manganelli

Papers from arXiv.org

Abstract: A decision maker starts from a judgmental decision and moves to the closest boundary of the confidence interval. This statistical decision rule is admissible and does not perform worse than the judgmental decision with a probability equal to the confidence level, which is interpreted as a coefficient of statistical risk aversion. The confidence level is related to the decision maker's aversion to uncertainty and can be elicited with laboratory experiments using urns a la Ellsberg. The decision rule is applied to a problem of asset allocation for an investor whose judgmental decision is to keep all her wealth in cash.

Date: 2019-03
New Economics Papers: this item is included in nep-exp and nep-upt
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http://arxiv.org/pdf/1903.06980 Latest version (application/pdf)

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Working Paper: Deciding with judgment (2016)
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