Expert judgments - Investments

Expert judgments

Often for the recognition of recognized experts are invited in their field, who express their opinions on how the market will behave. The big problem in such constructions is the ignoring of internal conflicts, when on external calls financial and non-financial stakeholders can react unpredictably. The problem is that narrow-profile specialists can not predict this course of events.

Two professors - S. Armstrong of the Wharton School of Business at the University of Pennsylvania and C. Green of the University Monash - conducted a series of experiments that mimicked the expert opinions of practitioners . They managed to compare the accuracy of the forecasts of the development of events in eight real situations, made by 106 experts and 169 ordinary students. Typical situations in which it was required to predict the development of events: the CEO asks the marketing manager to forecast the reaction of competitors to launch a new product on the market; the owner is interested in the opinion of the HR (HR specialist) about the sufficiency of a 2% increase in wages to calm the personnel threatening the strike. The results are amazing. Judgments of experts were accurate only in 32% of cases. Judgments of newcomers - in 29% of cases. Moreover, approximately the same result could be reached by simply throwing a coin at each stage of the forecast compilation. Forecasts of experts with more than five years of experience in resolving such conflicts turned out to be less accurate than those of experts whose experience did not exceed five years. And finally, experts who demonstrated greater confidence in their abilities proved to be no better than those who admitted the possibility of an inaccurate forecast. An even more severe conclusion is that the seers do not exist, but there will always be some boobies ready to take advantage of the seer's advice. The survey of participants showed that, in their opinion, a qualified forecast (made by a specialist in his field) should be one and a half times more accurate than an unskilled one.

From the experiments it follows that in conflict situations it is useless to try to build an accurate forecast with the help of experts. In such situations, too many interests are intertwined and too many stakeholders are involved, so that even an experienced expert is able to calculate all possible variants of the development of events.

Experience and knowledge of experts must be able to use. Several methods can be proposed.

The first is the method of structured analogies. The task of the experts is not to make forecasts and make judgments, but to bring analogues of similar events. (This method, in particular, is realized by the criminal authority in the film by V. Menshov, "Shirley-Myrli"). It is required of experts to recall whether they encountered similar situations, list them, choose those that are most appropriate for the situation in question, and describe how events developed in them. After that, the forecast is compiled by an independent observer according to previously agreed rules (for example, the development of events in the situation recognized as the closest one is taken as a basis).

The second method of using specialists is the role modeling of the reactions and actions of the participants in the conflict. In the role of experts should act people who are familiar with the position of the opposite side.

The third method is "military exercises", that is, modeling, playing the possible variants of the development of events by a group of top managers of the company considering investment projects with unobvious results, and experts. This method is widely used when hiring graduates of business schools by large employers.

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