Attacking the GIGO Problem

All of us who try to manage uncertainty in financial decisions face the problem of describing that uncertainty.  To the extent that we can improve on the accuracy of that description we can produce better results for our clients.  Professor Emeritus Joseph Messina has done some path breaking work in that regard.  Calibration theory has been shown to improve the forecasts of every manager.  No, it can’t turn a bad forecast into a good one, but it can make it better by employing a quantitative technique developed on the battlefields of Viet Nam. Just as some commanders tend to underestimate the losses in a battle and others tend to overestimate them, forecasters of returns for assets have their biases.  Dr. Messina’s paper is now posted on this blog.

About Frank Sortino

Frank Sortino is finance professor emeritus from San Francisco State University and Director of the Pension Research Institute which he founded in 1981. For 10 years he wrote a quarterly analysis of mutual funds for Pensions and Investments Magazine and he has written two books on the subject of Post Modern Portfolio Theory. He has been a featured speaker at many conferences in the U.S., Europe, South Africa, and the Pacific Basin. Dr. Sortino received his Ph.D in Finance from the University of Oregon and has carried out research projects with many institutions like Shell Oil, Netherlands and The City and County of San Francisco Retirement System.
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