The Wilkie investment model or often just called Wilkie model is a stochastic asset model developed by A.D. Wilkie that describes the behavior of various economics factors as stochastic

Stochastic process

In probability theory, a stochastic process , or sometimes random process, is the counterpart to a deterministic process...

 time series. These time series are generated by autoregressive models

Autoregressive model

In statistics and signal processing, an autoregressive model is a type of random process which is often used to model and predict various types of natural phenomena...

. The main factor of the model which influences all asset prices is the consumer price index

Consumer price index

A consumer price index measures changes in the price level of consumer goods and services purchased by households. The CPI, in the United States is defined by the Bureau of Labor Statistics as "a measure of the average change over time in the prices paid by urban consumers for a market basket of...

. The model is mainly in use for actuarial

Actuary

An actuary is a business professional who deals with the financial impact of risk and uncertainty. Actuaries provide expert assessments of financial security systems, with a focus on their complexity, their mathematics, and their mechanisms ....

 work and asset liability management

Asset liability management

In banking, asset and liability management is the practice of managing risks that arise due to mismatches between the assets and liabilities of the bank. This can also be seen in insurance....

. Because of the stochastic properties of that model it is mainly combined with Monte-Carlo-Methods

Monte Carlo method

Monte Carlo methods are a class of computational algorithms that rely on repeated random sampling to compute their results. Monte Carlo methods are often used in computer simulations of physical and mathematical systems...

.

Wilkie first proposed the model in 1986, in a paper published in the Transactions of the Faculty of Actuaries. It has since been the subject of extensively study and debate. Wilkie himself updated and expanded the model in a second paper published in 1995.
He advises to use that model to determine the "funnel of doubt", which can be seen as an interval of minimum and maximum development of a corresponding economic factor.

Components

• price inflation
• wage inflation
• share yield
• share dividend
• consols yield (long term interest rate)
• bank rate (short term interest rate)