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A Priori Probability

What is 'A Priori Probability'

A priori probability is a probability calculated by logically examining existing information. A priori probability can most easily be described as making a conclusion based upon deductive reasoning rather than research or calculation. The largest drawback to this method of defining probabilities is that it can only be applied to a finite set of events.

Explaining 'A Priori Probability'

Priori probabilities are most often used within the deduction method of calculating probability. This is because you must use logic to determine what outcomes of an event are possible in order to determine the number of ways these outcomes can occur.

For example, consider how the price of a share can change. Its price can increase, decrease or remain the same. Therefore, according to a priori probability, we can assume that there is a 1-in-3, or 33%, chance of one of the outcomes occurring (all else remaining equal).


Further Reading


Pitfalls in the application of discriminant analysis in business, finance, and economics
www.jstor.org [PDF]
… Gilbert (1969) has investigated and compared the effects on classification error rates and conditional probabilities if a … a Bernoulli variable X that takes on only two values {0, 1} with the probability P(X … A priori there is little reason to believe that any one application area is likely to …

The determinants of financing obstaclesThe determinants of financing obstacles
www.sciencedirect.com [PDF]
… Gilbert (1969) has investigated and compared the effects on classification error rates and conditional probabilities if a … a Bernoulli variable X that takes on only two values {0, 1} with the probability P(X … A priori there is little reason to believe that any one application area is likely to …

Herding and contrarian behavior in financial markets: An internet experimentHerding and contrarian behavior in financial markets: An internet experiment
www.aeaweb.org [PDF]
… Gilbert (1969) has investigated and compared the effects on classification error rates and conditional probabilities if a … a Bernoulli variable X that takes on only two values {0, 1} with the probability P(X … A priori there is little reason to believe that any one application area is likely to …

Economic uncertainty and econophysicsEconomic uncertainty and econophysics
www.sciencedirect.com [PDF]
… Gilbert (1969) has investigated and compared the effects on classification error rates and conditional probabilities if a … a Bernoulli variable X that takes on only two values {0, 1} with the probability P(X … A priori there is little reason to believe that any one application area is likely to …

Probability and uncertainty in economic modelingProbability and uncertainty in economic modeling
www.aeaweb.org [PDF]
… Gilbert (1969) has investigated and compared the effects on classification error rates and conditional probabilities if a … a Bernoulli variable X that takes on only two values {0, 1} with the probability P(X … A priori there is little reason to believe that any one application area is likely to …

High school economic education and access to financial servicesHigh school economic education and access to financial services
onlinelibrary.wiley.com [PDF]
… Gilbert (1969) has investigated and compared the effects on classification error rates and conditional probabilities if a … a Bernoulli variable X that takes on only two values {0, 1} with the probability P(X … A priori there is little reason to believe that any one application area is likely to …

Financial applications of discriminant analysis: a clarificationFinancial applications of discriminant analysis: a clarification
www.jstor.org [PDF]
… Gilbert (1969) has investigated and compared the effects on classification error rates and conditional probabilities if a … a Bernoulli variable X that takes on only two values {0, 1} with the probability P(X … A priori there is little reason to believe that any one application area is likely to …

Time-dependent Hurst exponent in financial time seriesTime-dependent Hurst exponent in financial time series
www.sciencedirect.com [PDF]
… Gilbert (1969) has investigated and compared the effects on classification error rates and conditional probabilities if a … a Bernoulli variable X that takes on only two values {0, 1} with the probability P(X … A priori there is little reason to believe that any one application area is likely to …

What is in a municipal bond rating?What is in a municipal bond rating?
onlinelibrary.wiley.com [PDF]
… Gilbert (1969) has investigated and compared the effects on classification error rates and conditional probabilities if a … a Bernoulli variable X that takes on only two values {0, 1} with the probability P(X … A priori there is little reason to believe that any one application area is likely to …



Q&A About A Priori Probability


How can you most easily describe a priori probability?

You can most easily describe a priori probability as making conclusions based upon deductive reasoning rather than research or calculation.

How do you calculate the number of ways an outcome occurs when using the deduction method?

For example, consider how the price of a share can change. Its price can increase, decrease or remain the same. Therefore, according to a priori probability, we can assume that there is a 1-in-3 chance (33%) one of these three outcomes will occur all else remaining equal.

What are the drawbacks of using this method of defining probabilities?

The largest drawback to this method of defining probabilities is that it can only be applied to finite sets of events.

What does the deduction method use in calculating probabilities?

The deduction method uses logic to determine what outcomes of an event are possible and then determines how many ways these outcomes can occur.

What is a priori probability?

A priori probability is a probability calculated by logically examining existing information.

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