A = Change in sequential EPS is positive next quarter 0.55
AC = Change in sequential EPS is 0 or negative next quarter 0.45
S = Change in sequential EPS is positive in the prior quarter 0.55
SC = Change in sequential EPS is 0 or negative in the prior quarter 0.45
On inspecting the data, you observe some persistence in EPS changes: Increases tend to be followed by increases, and decreases by decreases. The first probability estimate you develop is P(change in sequential EPS is positive next quarter | change in sequential EPS is 0 or negative in the prior quarter) = P(A | SC) = 0.40.
Find P(A|S).
Can anyone please show me how to draw the tree diagram. when i follow the traditional method, i am quite confused with the given info P(A|SC) = 0.40
Help :’(
I’ll draw the tree with bullets:
- Start
- S: P(S) = 0.55
- A: P(A | S) = p (the unknown)
- AC: P(AC | S) = 0.55 − p
- SC: P(SC) = 0.45
- A: P(A | SC) = 0.40
- AC: P(AC | SC) = 0.45 − 0.40 = 0.05
0.55 = P(A) = P(A | S) + P(A | SC) = P(A | S) + 0.40
P(A | S) = 0.15
Hey,
Firstly, Thanks for your time.
Secondly, the answer for the question is P(A|S) is 0.6727
I have done some bayes questions but this question is really confusing, i have no clue.
i forgot The most recent quarter’s EPS (2Q:2014) is announced, and the change is a positive sequential change (the event S). You are interested in forecasting EPS for 3Q:2014.
Clearly, there’s more going on here than meets the eye.
Where did you get this question?
@s2000magician
Volume 1 Reading 9 Example 7 Bayes bank EPS
@cpk123 thanks for your input
Start
- S: P(S) = 0.55
- SC: P(SC) = 0.45
- 0.40 P(A|sc) => so P(A) here = 0.45 * 0.4 = 0.18
- 0.60 Since total of P(S) = 0.55 -> you have an upper P(X) = 0.55 - 0.18 = 0/37 How is p(x) = 055-0.18
I hope i dont sound stupid, i did pretty bad in qm in college, i hope to study it at least for this exam
Good job, CPK.
I don’t know what I was thinking.
Not much, evidently.