TITLE

Decision Making Under Conditions of Uncertainty: A Wakeup Call for the Financial Planning Profession

AUTHOR(S)
Hopewell, Lynn
PUB. DATE
October 1997
SOURCE
Journal of Financial Planning;Oct97, Vol. 10 Issue 5, p84
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
The article discusses problems associated with decision making, while using illustrative examples to show how uncertainty intrinsic to financial planning decisions. Oddly enough, academic attention to the use of modern quantitative techniques applied to personal financial planning decision-making has been almost nonexistent. The second generation of planning tools will explicitly address uncertainty. Software manufacturers should incorporate Monte Carlo techniques into common tools. Planners must become mote sophisticated in their understanding of uncertainty, and demand the education and tools to deal with it. Models that assume a fixed relationship between inputs and outputs are called deterministic. A deterministic model produces an unambiguous answer. Models that depend on inputs that are influenced by chance are called stochastic. Stochastic models produce many possible answers, described by a distribution. A model that depicts the time of sunset is deterministic because it relies on fixed physical laws. Instead of deterministic models stochastic models will prevail. The typical analysis makes assumptions about the variables and computes an answer. The opportunities to apply the science of decision-making under conditions of uncertainty to financial planning are almost unlimited. INSET: What is a Monte Carlo simulation?..
ACCESSION #
9712013898

 

Related Articles

  • Decision Making Under Conditions of Uncertainty: A Wakeup Call for the Financial Planning Profession. Hopewell, Lynn // Journal of Financial Planning;Apr2004, Vol. 17 Issue 4, p76 

    Presents a reprint of the article "Decision Making Under Conditions of Uncertainty: A Wakeup Call for the Financial Planning Profession," by Lynn Hopewell, which originally appeared in the October 1997 issue of "Journal of Financial Planning." The article suggests the use of stochastic models...

  • Wealth Planning Under Uncertainty. McCabe, Bernard J.; Boinske, Charles P. // Journal of Financial Planning;Mar2000, Vol. 13 Issue 3, p84 

    This article discusses the issue of spending planning for retirees in the context of uncertainty. This article also illustrates how simulation models help financial advisors develop a realistic spending and savings plan. The Monte Carlo simulation approach offers the financial planners an...

  • The Application of Real Options to Capital Budgeting. Wang, George Yungchih // World Academy of Science, Engineering & Technology;Jun2010, Issue 42, p793 

    No abstract available.

  • TOMA DE DECISIONES DE AGENTES RACIONALES CON PROCESOS MARKOVIANOS. Hernández-Lerma, Onésimo; Venegas-Martínez, Francisco // Trimestre Económico;oct-dic2012, Vol. 79 Issue 4, p773 

    This research conducts a review of theoretical and practical developments of Markov processes in the specialized literature, highlighting their recent advances and showing their potential for their technical goodness, in modeling the decision making processes of rational agents adding more...

  • Bayesian inference for stochastic multitype epidemics in structured populations using sample data. O'NEILL, PHILIP D. // Biostatistics;Oct2009, Vol. 10 Issue 4, p779 

    This paper is concerned with the development of new methods for Bayesian statistical inference for structured-population stochastic epidemic models, given data in the form of a sample from a population with known structure. Specifically, the data are assumed to consist of final outcome...

  • THE STOCHASTIC SIMULATION BASED ON THE MONTE CARLO METHOD. Diaconu, Aurelian // Metalurgia International;May2012, Vol. 17 Issue 5, p162 

    The stochastic simulation based on the Monte Carlo technique is used when a deterministic problem is associated with a random (probabilistic) model and by generating some random variables, functionally related to the solution, experiences on the model are made and information regarding the...

  • INVESTMENT DECISION MAKING BASED ON THE SIMULATION METHOD. MARTIN BOĎA; KANDEROVÁ, MÁRIA // Ad Alta: Journal of Interdisciplinary Research;2014, Vol. 4 Issue 1, p32 

    In preparing financial plans as part of the investment decision making process it is necessary to integrate risk and uncertainty resulting from unpredictability of key factors of investment planning. The paper is devoted to applications of the Monte Carlo simulation method as one of tools that...

  • From the Editor. Michelson, Stuart // Financial Services Review;Summer2010, Vol. 19 Issue 2, preceding p96 

    The article discusses papers published within the issue, including one by Haiwei Chen and Jim Estes on a study on Monte Carlo simulations to compare the performances of three popular asset allocation strategies in the financial press, one by Sherman D. Hanna and Suzanne Lindamood on three types...

  • An Integral Approach to Determining Asset Allocations. van Welie, Tom; Janssen, Ronald; Hoogstrate, Monique // Journal of Financial Planning;Jan2004, Vol. 17 Issue 1, p50 

    This article describes the drawbacks of the sequential approach and introduces an integral approach to determining optimal asset allocations based on clients' objectives and risk tolerance levels. Traditional asset allocation advice was based on information provided by clients in conversations....

Share

Read the Article

Courtesy of VIRGINIA BEACH PUBLIC LIBRARY AND SYSTEM

Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics