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Adequate Decision Rules for Portfolio Choice Problems : Finance and Capital Market - T. Goodall

Adequate Decision Rules for Portfolio Choice Problems

By: T. Goodall

Hardcover | 30 April 2002 | Edition Number 1

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The author presents the theory of portfolio choice from a new perspective, recommending decision rules that have advantages over those currently used in theory and practice. Portfolio choice theory relies on expected values. Goodall argues that this dependence has a historical basis and argues that current decision rules are inadequate for most portfolio choice situations. Drawing on econometric solutions proposed for the problem of forecasting outcomes of a chance experiment, the author defines adequacy criteria, and proposes adequate decision rules for a variety of situations. Goodall's theory combines the problems of prediction and choice, and formulates solutions based on cost functions that fit the underlying decision situation.

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