# Posterior Probability

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## Definition of 'Posterior Probability'

Posterior probability is a measure of the probability of an event occurring, given that another event has already occurred. It is calculated by multiplying the prior probability of the first event by the likelihood of the second event, given the first.

For example, suppose you are trying to determine the probability of rain tomorrow, given that it rained today. The prior probability of rain tomorrow is the probability of rain in general, which is likely to be based on historical data. The likelihood of rain tomorrow, given that it rained today, is the probability that rain will occur on two consecutive days. The posterior probability of rain tomorrow is the product of these two probabilities.

Posterior probability is a useful tool for making decisions in the face of uncertainty. By taking into account the prior probability of an event and the likelihood of that event occurring, we can make more informed decisions about how to proceed.

In finance, posterior probability can be used to make investment decisions. For example, a portfolio manager may use posterior probability to determine the likelihood of a stock price rising or falling. This information can then be used to make decisions about whether to buy or sell the stock.

Posterior probability is also used in machine learning. In machine learning, posterior probability is used to represent the degree of belief in a hypothesis, given the evidence. This information can then be used to make predictions about future events.

Posterior probability is a powerful tool that can be used to make decisions in the face of uncertainty. By taking into account the prior probability of an event and the likelihood of that event occurring, we can make more informed decisions about how to proceed.

For example, suppose you are trying to determine the probability of rain tomorrow, given that it rained today. The prior probability of rain tomorrow is the probability of rain in general, which is likely to be based on historical data. The likelihood of rain tomorrow, given that it rained today, is the probability that rain will occur on two consecutive days. The posterior probability of rain tomorrow is the product of these two probabilities.

Posterior probability is a useful tool for making decisions in the face of uncertainty. By taking into account the prior probability of an event and the likelihood of that event occurring, we can make more informed decisions about how to proceed.

In finance, posterior probability can be used to make investment decisions. For example, a portfolio manager may use posterior probability to determine the likelihood of a stock price rising or falling. This information can then be used to make decisions about whether to buy or sell the stock.

Posterior probability is also used in machine learning. In machine learning, posterior probability is used to represent the degree of belief in a hypothesis, given the evidence. This information can then be used to make predictions about future events.

Posterior probability is a powerful tool that can be used to make decisions in the face of uncertainty. By taking into account the prior probability of an event and the likelihood of that event occurring, we can make more informed decisions about how to proceed.

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Copyright © 2004-2023, MyPivots. All rights reserved.