The financial encyclopedia uses cookies to improve your user experience. Find out more here!



 

 


 

Bayes theorem
 

 

A relationship between the conditional and the marginal probabilities of random events. LetP[A] denote the marginal probability of A and let P[A\B] denote the probability of A conditional on B. Bayes theorem states that P[Al|B] =P[B|A] x P[A]/P[B], given P[B] > 0.

 

Reference: Oxford Press Dictonary of Economics, 5th edt.