engleski

Bayesian Approach to Decision Making on Investing in Bonds

In decision making on investing in bonds point estimates of interest rates labelled as "forecasts" are often produced by human experts, who tend to overreact and overestimate future interest rates. Combination of judgemental forecasts and other forecasts (statistical, market, survey) under formal rules may be superior because it helps in avoiding judgemental biases. Bayesian decision aiding technique using normal distribution is presented to illustrate how investors may combine forecasts and in doing so boost their chance of success.

Bayesian decision analysis; investing; bonds; combining forecasts

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