Golden Roof ISIPTA'11 home Nordkette mountain range

Diogo Bezerra, Fernando Campello de Souza

Dirichlet Model Versus Expert Knowledge


Decision theory is used to choose a portfolio. Elicitation methods was used based on the utility function and from expert opinion thus, enabling the creation of a utility function for the investor and another for the a priori distribution on economic indicators. The model chosen for an investment portfolio was formulated based on decision theory, incorporating aspects of systematic and unsystematic risk. The model was developed so as to structure an effcient way to understand the application of decision theory in the financial market as well as the application of the Imprecise Dirichlet Model-IDM. The IDM allows the use of imprecise probability. Finally, the IDM was compared to the Markowitz method and also, to the decision model, using only expert opinion, considering an allocation over time to verify which of the three models was the best one. The final conclusion is that expert opinion should not be neglected in her compiling a portfolio.


Linear Programming, Elicitation, Portfolio Selection, Financial

Download area

The paper is available in the following formats:

Authors’ addresses

Diogo Bezerra
Núcleo de Gestão - CAA,
Universidade Federal de Pernambuco
Caruaru - PE,

Fernando Campello de Souza
Rua Neto de Mendonca, 121, Apto. 2301, Tamarineira
52050-100 Recife, Pernambuco

E-mail addresses

Diogo Bezerra
Fernando Campello de Souza

Send any remarks to