base rate neglect 2012 quicksheet error

CFA Level III
#1

we want to work out P(A|B)=P(B|A)*P(A)/P(B)

in representativeness, what is base rate neglect? is it neglect P(A|B) or neglect P(A) or P(B)

can anyone clarify? thanks

#2

As per Bayes-----> we update probabilities

P (A given B ) = P (B given A) X P( A) / P (B)—> here the base rate is P (B given A) i guess

#3

then you agree schweser quick sheet is wrong? but people usally under-estimate the probability of P(B given A) or over-estimate in base rate neglect?

#4

wiki say

http://en.wikipedia.org/wiki/Base_rate_fallacy

base rate neglect is the "is an error that occurs… without taking into account the prior probability (“base rate”) .

P(A|B) = P(B|A) P(A) / P(B)

the namings of the terms are

posterior = likelyhood * prior / normalizingTerm

so, prior is refering to P(A)

#5

according to you, it is P(A)?

#6

Yes. Thanks for pointing out my typo ( i have corrected it now.)

Igoring prior means ignoring P(A)

#7

Yes. Thanks for pointing out my typo ( i have corrected it now.)

Igoring prior means ignoring P(A)