Article ID Journal Published Year Pages File Type
806320 Reliability Engineering & System Safety 2013 14 Pages PDF
Abstract

•We map the common-cause alpha factor model down to a smaller group.•Treating mapped data like observed data is much too conservative.•Mapped alpha factors have a joint posterior distribution that cannot be Dirichlet.•We approximate the mapped alpha factors' complicated posterior distribution.•Bayesian mapping up is also possible, but highly sensitive to the prior.

When mapping the common-cause alpha factor model from a group of one size to one of another size, the following facts are shown: (1) mapping data down and treating the mapped data like observed data is much too conservative; (2) mapping alpha factors down puts restrictions on the resulting alphas, so their joint distribution cannot be Dirichlet; (3) if the mapped alpha factors' posterior distributions are moderately bell-shaped, the joint distribution can be approximated well by using correlated logistic-normal conditional probabilities and (4) Bayesian mapping up is possible, but highly sensitive to the prior distribution in the top group.

Related Topics
Physical Sciences and Engineering Engineering Mechanical Engineering
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