STAT 101 Lecture Notes - Lecture 8: Conditional Probability, Main Diagonal, Sample Space
Document Summary
Stat 101 - introduction to business statistics - lecture 8: continuing probability. In some problems, the object of interest is the chance of two events happening simultaneously. Another way of articulating this statement is that we are interested in finding the association between two variables. In the probability tables below we have probability models for the daily returns on two stocks, ibm and amazon. If we make the assumption that the future looks like the past then we can use these models to learn about future returns. These distributions are called marginal probability distributions for each variable (not telling you about how the two stocks move together) The main thing to notice from these 2 tables is that amzn is much more likely to have an extreme return than is ibm. Amzn is described as more volatile, and this attribute can be identified directly from the probability distribution of returns.
