Scandinavian Working Papers in Economics

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2015/7: Best estimate reporting with asymmetric loss

Jostein Lillestøl () and Richard Sinding-Larsen ()
Additional contact information
Jostein Lillestøl: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Richard Sinding-Larsen: Dept. of Geology and Mineral Resources Engineering, Norwegian University of Science and Technology, Postal: Norwegian University of Science and Technology , Department of Geology and Mineral Resources Engineering, Sem Sælands veg 1, N-7491 Trondheim, Norway

Abstract: This paper considers the problem of point prediction based on a predictive distribution, representing the uncertainty about the outcome. The issue explored is the reporting of a single characteristic, typically the mean, the median or the mode, in the context of a skewed distribution and asymmetric loss. Special attention is given to the two-piece normal distribution and asymmetric piecewise linear and quadratic loss. The practical context for the issue is the yearly reporting of remaining petroleum resources given by the authorities to stakeholders that may ask for just a single number.

Keywords: Estimate reporting; asymmetric loss; point prediction; predictive distribution

JEL-codes: C00; C10; C13

15 pages, January 30, 2015

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