Investors have long relied on scenario analysis as an alternative to mean-variance analysis to help them construct portfolios. Even though mean-variance analysis accounts for all potential scenarios, many investors find it difficult to implement because it requires them to specify statistical...

Financial analysts assume that the reliability of predictions derived from regression analysis improves with sample size. This is generally true because larger samples tend to produce less noisy results than smaller samples. But this is not always the case. Some observations are more relevant...

The authors describe a new prediction system based on the concept of statistical relevance, which defines the most useful observations for forming predictions. Their prediction system also encompasses the notion of fit, which enables one to assess the unique reliability of each individual...