The likelihood of various stock market return distributions, Part 1: Principles of inference

Harry M. Markowitz, Nilufer Usmen

Research output: Contribution to journalArticle

16 Scopus citations

Abstract

This is the first of two articles which apply certain principles of inference to a practical, financial question. The present article argues and cites arguments which contend that decision making should be Bayesian, that classical (R. A. Fisher, Neyman-Pearson) inference can be highly misleading for Bayesians as can the use of diffuse priors, and that Bayesian statisticians should show remote clients with a variety of priors how a sample implies shifts in their beliefs. We also consider practical implications of the fact that human decision makers and their statisticians cannot fully emulate Savage's rational decision maker.

Original languageEnglish
Pages (from-to)207-219
Number of pages13
JournalJournal of Risk and Uncertainty
Volume13
Issue number3
DOIs
StatePublished - 1 Jan 1996

Keywords

  • Bayesian inference
  • Lindley's paradox
  • Remote clients

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