Decision-Making, Sub-additive Recursive “Matching” Noise and Biases in Risk-Weighted Stock/Bond Commodity Index Calculation Methods in Incomplete Markets with Partially Observable Multi-attribute Preferences

2018 ◽  
pp. 177-232
Author(s):  
Michael I. C. Nwogugu
2013 ◽  
Vol 05 (03) ◽  
pp. 1350020 ◽  
Author(s):  
MICHAEL C. I. NWOGUGU

While indices, index tracking funds and ETFs have grown in popularity during then last ten years, there are many structural problems, tracking errors and biases inherent in index calculation methodologies and the legal/economic structure of ETFs, which raise actionable issues of "suitability" and "fraud" under US securities laws. This article contributes to the existing literature by: (a) introducing and characterizing the errors and biases inherent in "risk-adjusted" index-weighting methods and the associated adverse effects; (b) showing how these biases/effects reduce social welfare, and can facilitate harmful arbitrage activities; (c) introducing new theorems.


2018 ◽  
Author(s):  
◽  
Andrew R. Buck

Multicriteria decision-making problems arise in all aspects of daily life and form the basis upon which high-level models of thought and behavior are built. These problems present various alternatives to a decision-maker, who must evaluate the trade-offs between each one and choose a course of action. In a sequential decision-making problem, each choice can influence which alternatives are available for subsequent actions, requiring the decision-maker to plan ahead in order to satisfy a set of objectives. These problems become more difficult, but more realistic, when information is restricted, either through partial observability or by approximate representations. Pathfinding in partially observable environments is one significant context in which a decision-making agent must develop a plan of action that satisfies multiple criteria. In general, the partially observable multiobjective pathfinding problem requires an agent to navigate to certain goal locations in an environment with various attributes that may be partially hidden, while minimizing a set of objective functions. To solve these types of problems, we create agent models based on the concept of a mental map that represents the agent's most recent spatial knowledge of the environment, using fuzzy numbers to represent uncertainty. We develop a simulation framework that facilitates the creation and deployment of a wide variety of environment types, problem definitions, and agent models. This computational mental map (CMM) framework is shown to be suitable for studying various types of sequential multicriteria decision-making problems, such as the shortest path problem, the traveling salesman problem, and the traveling purchaser problem in multiobjective and partially observable configurations.


2021 ◽  
pp. 103645
Author(s):  
Vojtěch Kovařík ◽  
Martin Schmid ◽  
Neil Burch ◽  
Michael Bowling ◽  
Viliam Lisý

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