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Statistical decision functions with judgment

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  • Manganelli, Simone

Abstract

A decision maker tests whether the gradient of the loss function evaluated at a judgmental decision is zero. If the test does not reject, the action is the judgmental decision. If the test rejects, the action sets the gradient equal to the boundary of the rejection region. This statistical decision rule is admissible and conditions on the sample realization. The confidence level reflects the decision maker’s aversion to statistical uncertainty. The decision rule is applied to a problem of asset allocation. JEL Classification: C1, C11, C12, C13, D81

Suggested Citation

  • Manganelli, Simone, 2021. "Statistical decision functions with judgment," Working Paper Series 2512, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20212512
    Note: 196912
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    References listed on IDEAS

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    7. Manganelli, Simone, 2023. "Double conditioning: the hidden connection between Bayesian and classical statistics," Working Paper Series 2786, European Central Bank.
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    1. Manganelli, Simone, 2023. "Double conditioning: the hidden connection between Bayesian and classical statistics," Working Paper Series 2786, European Central Bank.

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    Keywords

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    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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