Northwestern University Fall 2009 HOMEWORK 3 DUE MONDAY, OCTOBER 26, IN CLASS.
Marciano Siniscalchi Econ 331-0
Note These questions are from the midterms I gave in 2007 and 2008, so you can get a sense for the kind of questions I ask in an exam. For your
HOMEWORK 2 SOLUTIONS
Northwestern University Fall 2008
Marciano Siniscalchi Econ 331-0
1. Forecasting and Random Variables The individual minimizes s P (cfw_s)[X (s) ]2 with respect to . Dierentiating with respect to this variable yields s P (cfw_s)2[X (s
Northwestern University Fall 2009
Marciano Siniscalchi Econ 331-0
HOMEWORK 4 DUE MONDAY, NOVEMBER 16, 2009, IN CLASS. PLUS ONE PRACTICE PROBLEM
1 Consider an economy with one risk-free asset, with return rf = 1.01, and two risky returns r1 , r2 . The latt
Review
Interpretations of Probabilty
Probability and Forecasts
Eco331: Subjective Probability as a Rational Forecast
Marciano Siniscalchi
September 27, 2009
Review
Interpretations of Probabilty
Probability and Forecasts
Probability, Random Variables, Expe
Northwestern University Fall 2009
Marciano Siniscalchi Econ 331-0
THE BAYESIAN APPROACH TO PROBABILITY
1. Introduction Last week we focused on the formal properties of probability. We now turn to its interpretation. By and large, there are three main scho
Introduction
Probability
Random Variables
Expectation
Joint Distributions
Summary
Innite State Space
Eco331: Introduction
Marciano Siniscalchi
September 23, 2009
Introduction
Probability
Random Variables
Expectation
Joint Distributions
Summary
Innite Stat
Northwestern University Fall 2009
Marciano Siniscalchi Econ 331-0
INTRODUCTION AND REVIEW OF PROBABILITY
1. Introduction This course focuses on economic decisions in circumstances where the ultimate consequences of an individuals actions are cannot be kno
HOMEWORK 1 SOLUTION Northwestern University Fall 2009 Marciano Siniscalchi Econ 331-0
1. The Peter Lynch Problem This was pretty straightforward. For the rst part, we rst compute the probability of k successes 1 in n = 13 trials, for k = 11, 12, 13, where
Northwestern University Fall 2009 HOMEWORK 3 DUE MONDAY, OCTOBER 26, IN CLASS PLUS PRACTICE PROBLEMS
Marciano Siniscalchi Econ 331-0
Note These questions are from the midterms I gave in 2007 and 2008, so you can get a sense for the kind of questions I ask
Northwestern University Fall 2009 HOMEWORK 2 DUE MONDAY, OCTOBER 19, IN CLASS.
Marciano Siniscalchi Econ 331-0
1. Forecasting and Random Variables Consider a nite state space S , a probability P on S , and a random variable X : S R. Suppose that the follo
Overview
Formal Setup
Foundations
A Diversion: Ambiguity
Eco331: Value of Information Foundations
Marciano Siniscalchi
November 11
Overview
Formal Setup
Foundations
A Diversion: Ambiguity
Overview
Value of Information: Formal Denition Emphasize general ca
Overview
A Monopoly Problem
Signals
Eco331: Value of Information
Marciano Siniscalchi
November 9, 2009
Overview
A Monopoly Problem
Signals
Overview
Dynamic choice: take actions at multiple points in time Value of Information: two choices:
Time 1 : Acquire
Northwestern University Fall 2009 THE VALUE OF INFORMATION
Marciano Siniscalchi Econ 331-0
1. Introduction This lecture marks the beginning of our study of dynamic choice. This week we focus on a simple, but extremely important type of problems: prior to
Overview
Mean-Variance Preferences
Portfolio Choice
Eco331: Mean-Variance Analysis
Marciano Siniscalchi
November 2
Overview
Mean-Variance Preferences
Portfolio Choice
Overview
When Mean and Variance are All That Matters The portfolio problem in the Mean-V
Northwestern University Fall 2009 MEAN-VARIANCE ANALYSIS AND PORTFOLIO CHOICE WITH MANY ASSETS
Marciano Siniscalchi Econ 331-0
1. Mean is Good, Variance is Bad (or is it?) Portfolio choice with a single risky asset reduces to a simple trade-o: stocks (gen
Northwestern University Fall 2009 STOCHASTIC DOMINANCE
Marciano Siniscalchi Econ 331-0
1. Introduction Our analysis so far builds upon expected-utility theory. An unpleasant implication of this approach is that, without knowledge of an individuals utility
Northwestern University Fall 2009
Marciano Siniscalchi Econ 331-0
MORE ON THE ARROW-PRATT MEASURE(S) OF RISK AVERSION
1. Introduction Recall that, when comparing risk attitudes, the Arrow-Pratt measure of (absolute) risk aversion, A( w ) = u (w ) u (w)
pl
Northwestern University Fall 2009 RISK AVERSION AND PORTFOLIO CHOICE
Marciano Siniscalchi Econ 331-0
1. Introduction We continue our analysis of choice under risk. The main focus of this lecture is on comparing risk attitudes of dierent individuals: when
Northwestern University Fall 2009 RISK AND RISK AVERSION
Marciano Siniscalchi Econ 331-0
1. Introduction The main reason why expected-utility theory is interesting is the phenomenon of risk aversion. The key idea is that people are typically unwilling to
Northwestern University Fall 2009 THE EXPECTED UTILITY CRITERION
Marciano Siniscalchi Econ 331-0
1. Introduction We nally turn to the main subject matter of this course: choice under risk and uncertainty, and in particular expected-utility theory. I will
Northwestern University Fall 2009
Marciano Siniscalchi Econ 331-0
BAYESIAN INFERENCE AND THE FREQUENTIST VIEW
1. Introduction This lecture has two main objectives. First, it will briey introduce you to Bayes Rule, which plays an important role in the subj