Economics of Disagreement-Financial Intuition for the Renyi Divergence.

ABSTRACT: Disagreement is an essential element of science and life in general. The language of probabilities and statistics is often used to describe disagreements quantitatively. In practice, however, we want much more than that. We want disagreements to be resolved. This leaves us with a substantial knowledge gap, which is often perceived as a lack of practical intuition regarding probabilistic and statistical concepts. Here, we propose to address disagreements using the methods of financial economics. In particular, we show how a large class of disagreements can be transformed into investment opportunities. The expected financial performance of such investments quantifies the amount of disagreement in a tangible way. This provides intuition for statistical concepts such as the Rényi divergence, w

SUBMITTER: Soklakov AN 

PROVIDER: S-EPMC7517462 | biostudies-literature | 2020 Aug

REPOSITORIES: biostudies-literature