YouTube T2-9 Bayes Theorem: Simple test for disease

[Nicole Seaman]

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 from Chapter 6 of http://amzn.to/2C4UCo6 and it reads in full as follows: "Imagine there is a disease that afflicts just 1 in every 100 people in the population. A new test has been developed to detect the disease that is 99% accurate. That is, for people with the disease, the test correctly indicates that they have the disease in 99% of cases. Similarly, for those who do not have the disease, the test correctly indicates that they do not have the disease in 99% of cases. If a person takes the test and the result of the test is positive, what is the probability that he or she actually has the disease?"

Here is David's XLS: http://trtl.bz/2BO9LNq

 

[Jaskarn]

Hi,

I am not able to find video of bayes' rule under fundamentals of probability topic. however, it is there in study notes. Please help

 

[David Harper CFA FRM]

@Jaskarn I moved your post to this thread (T2-9 Bayes Theorem: Simple test for disease). Please note this is part of a YouTube playlist (featuring the basics) that continues with ...

• T2-9b Bayes Theorem, adding a bit of complexity https://forum.bionicturtle.com/threads/t2-9b-bayes-theorem-adding-a-bit-of-complexity.21767/ , and
• T2-9c Bayes Theorem, Three-state variable https://forum.bionicturtle.com/threads/t2-9c-bayes-theorem-three-state-variable.21935/