Deterministic versus stochastic sensitivity analysis in investment problems: An environmental case study
AbstractSensitivity analysis in investment problems is an important tool to determine which factors can jeopardize the future of the investment.Information on the probability distribution of those factors that affect the investment is mostly lacking.In those situations the analysts have two options: (i) apply a method that does not require knowledge of that distribution, or (ii) make assumptions about the distribution.In both approaches sensitivity analysis should result in practical information about the actual importance of potential factors.For approach (i) we apply statistical design of experiments (DOE) in combination with regression analysis or meta-modeling.For approach (ii) we investigate five types of relationships between the model output and each individual factor; Pearson's p, Spearman's rank correlation, and location, dispersion, and statistical dependence.We introduce two distribution types popular with practitioners: uniform and triangular.In an environmental case study both approaches identify the same factors as important.
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Bibliographic InfoArticle provided by Elsevier in its journal European Journal of Operational Research.
Volume (Year): 141 (2002)
Issue (Month): 1 (August)
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Web page: http://www.elsevier.com/locate/eor
Other versions of this item:
- Groenendaal, W.J.H. van & Kleijnen, J.P.C., 2001. "Deterministic versus Stochastic Sensitivity Analysis in Investment Problems: An Environmental Case Study," Discussion Paper 2001-46, Tilburg University, Center for Economic Research.
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