Predictive Accuracy

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August 31, 2024 3 min read Definitions

Lucas Critique: Policy Evaluation in Macroeconomics

Economics Finance Macroeconomics Policy Evaluation Rational Expectations Economic Models Predictive Accuracy

The Lucas Critique highlights the need for policymakers to consider how changes in economic policies will alter the behavior of individuals and firms, thus invalidating predictions based on historical data.

August 25, 2024 4 min read Definitions

Law of Large Numbers: Statistical Expectation and Predictive Accuracy

Mathematics Statistics Insurance Probability Statistical Theorems Insurance Premiums Predictive Accuracy Risk Assessment

The Law of Large Numbers states that the greater the number of exposures, the more accurate the prediction of outcomes, less deviation from expected losses, and greater credibility of the prediction, a foundation for calculating insurance premiums.