1. Nicole Seaman

    YouTube T2-9c Bayes Theorem, Three-state variable

    This explores the answer to Miller's sample question in Chapter 6 of Mathematics and Statistics for Financial Risk Management. There are three types of managers: Out-performers (MO), in-line performers (MI) and under-performers (MU). The prior probability that a manager is an outperformer is...
  2. Nicole Seaman

    YouTube T2-9b Bayes Theorem, adding a bit of complexity

    Here is the question: "You are an analyst at Astra Fund of Funds. Based on an examination of historical data, you determine that all fund managers fall into one of two groups. Stars are the best managers. The probability that a star will beat the market in any given year is 75%. Ordinary...
  3. Nicole Seaman

    YouTube T2-9 Bayes Theorem: Simple test for disease

    Bayes Theorem updates a conditional probability with new evidence. In this case, the conditional probability (disease | positive test result) equals the joint probability (disease, positive test result) divided by the unconditional probability (positive test result). The question illustrated is...