If expected return and risk are not used as inputs into rational decision making then what do you propose we use to make investment decisions? Isn't ex-ante vol just a level of uncertainty about your estimated returns? Seems right to me to discount your expectations by the level of confidence you have in them.
If expected return and risk are not used as inputs into rational decision making then what do you propose we use to make investment decisions? Isn't ex-ante vol just a level of uncertainty about your estimated returns? Seems right to me to discount your expectations by the level of confidence you have in them.