Cromwell's Rule and the Role of the Prior in the Economic Metric
克伦威尔法则与经济意义度量中的先验作用
We show that using Bayesian decision theory to draw inference about the economic significance of a model requires careful specification of model uncertainty in the prior density. As an example, we use the Bayesian investor's portfolio allocation problem to show that failure to include probability point mass on the null hypothesis that returns are not predictable will overstate the economic significance of the predictive model. The dissonance between the statistical and…