A famous finance professor once told us that good diversification meant holding everything in the world. Fine, but in what proportion?
Suppose you could invest in every country in the world. How much would you invest in each? In a market-capitalization weighted index, you'd invest in each country in proportion ... [Read more...]
Benford's law is an amazing thing. If you know the probability distribution that classes of "natural" numbers should have, you can detect where people might be faking data: phony tax returns, bogus scientific studies, etc. [Read more...]
When estimating the cost of a bunch of purchases, a useful heuristic is rounding to the nearest dollar. (In fact, on US income tax returns, one is allowed to omit the cents). If prices were uniformly distributed, the following two heuristics would be equally accurate:
* Rounding each item up or ... [Read more...]
Decision Science News is no stranger to misleading infographics in free New York newspapers. We could stop reading them entirely, but we find that playing "spot the infographic flaw" makes time fly on the subway.
Recently we saw the above graphic in a paper called Metro. Can you spot the ... [Read more...]
HOW TO DISPLAY A LINE PLOT WITH COUNT INFORMATION? In a previously-mentioned paper Sharad and your DSN editor are writing up, there is the above line plot with points. The area of each point shows the count of observations. It’s done in R with ggplot2 (hooray for Hadley). We ... [Read more...]
SOME EMPIRICAL BASES FOR CHOOSING CERTAIN RISK REPRESENTATIONS OVER OTHERS This week DSN posts some thoughts (largely inspired by the work of former colleagues Stephanie Kurzenhäuser, Ralph Hertwig, Ulrich Hoffrage, and Gerd Gigerenzer) about communicating risks to the general public, providing references and delicious downloads where possible. Representations to ... [Read more...]
WHAT IF YOUR GPS TOLD YOU WHAT WOULD HAVE HAPPENED IF YOU HAD TAKEN THE OTHER ROUTE? Not long ago, your Decision Science News editor was planning a trip to a book group meeting along with another member. The monthly book group takes place in Cove Neck Long Island, about ...