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I am trying to understand a research paper. It contains a chart of prior and posterior probabilities (Bayes Probabilities) of an individual stock. However, I need guidance in interpreting what the values in the chart mean. In particular for any technical indicator, what does each P represent. I can guess what the first two lines mean. My guess is that P(stock up) is the probability of stock price going up. Similarly, my guess is that P(stock down) is the probability of stock price going down.

This is what the research paper says about the chart:

Table 2 tabulates several technical indicators calculated by BP. It also gives the result of prior probability and posterior probability. The value of each technical indicator stands for the performance accuracy of the individual stock according to the recent 300 trading days. The result can provide a standard of optimal decision-making for selecting significant technical indices.

Probabilities of Technical Indicators

So my questions are:

  1. Is my understanding of P in the first two lines correct ?
  2. What is P(non) [my guess is the probability of stock price not changing ?]
  3. What is P(up|up) ?
  4. What is P(down|down) ?
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  • $\begingroup$ I didn't find another way of asking this but could you provide us the paper? I got interested in this bayesian approach to technical indicators. Thank you. $\endgroup$ – vhcandido Feb 15 '17 at 2:59
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My guesses:

  1. Prior probability of stock going up/down
  2. Prior probability of stock not changing
  3. Posterior probability of stock going up given the indicator was up.
  4. Posterior probability of stock going down given the indicator was down.

Since they are giving prior and posterior probabilities, I think the only version that fits is:

$$ P(Stock_{up} | Indicator_{up}) \propto P(Indicator_{up} | Stock_{up}) P(Stock_{up}) $$

You might be able to double check this interpretation using the remainder of the paper.

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  • $\begingroup$ Thank you very much. Very much appreciate your response. :) $\endgroup$ – Guddi May 7 '15 at 3:36

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