Statistics Archives

How to Use Bayesian Reasoning to Make Better Predictions

What if you could make better decisions because you’re able to make better predictions? How can an eighteenth-century statistician help you? People often miscalculate the probability of an event occurring and then make poor decisions based on that miscalculation. Steven Pinker explains how you can use Bayesian reasoning to make more accurate assessments of evidence and, in turn, make more accurate predictions about the future. Read more to learn how to use Bayesian reasoning to make decisions that are based on a better understanding of what’s going on.

Understand Probability and Randomness to Make Better Decisions

Are you superstitious at all? Can you tell when data is meaningful and when it’s just random? According to Steven Pinker, an important aspect of rationality is getting a good handle on probability and randomness in order to make more accurate assessments and, in turn, better decisions. He looks at two ways that people misunderstand probability and shares a handy tool to counter these flaws in thinking. Keep reading to get a better grasp on how probability works and how randomness comes into play.

Steven Pinker Explains Why Correlation Doesn’t Equal Causation

Do you ever confuse correlation with causation? How can you accurately determine the cause of something? In Rationality, Steven Pinker examines why people make irrational decisions. Often, people run into problems when considering causation and correlation. He explains how to avoid the trap of linking them when they’re not connected and offers some tips on how to determine actual causes. Continue reading to understand why correlation doesn’t equal causation.

Jim Simons’s Career: From Soviet Codes to Stock Trend Patterns

How did Jim Simons first identify stock trend patterns that changed the market forever? What did Simons do as a codebreaker? Jim Simons is known for his work as a mathematician who identified recognizable and consistent patterns in the financial market. But what some people might not know is that he started out decoding Soviet messages and signals during the Cold War. Discover more about how a codebreaker used his work to identify stock trend patterns.

How Jim Simons’s Trading Strategy Changed the Market

What is Jim Simons’s trading strategy? Why did his strategy take off in the 1990s and 2000s? Jim Simons’s trading strategy was so unique that it made him one of the best money managers in modern financial history. It focused on buying or selling currencies at the right time based on the model’s predictions of when they were most likely to rise or fall in value. Let’s look at how the Renaissance strategy dominated the Quant Era of Wall Street.

The Marginal Value Theorem In Relation to Humans

What is the marginal value theorem? Why is technology so distracting? To explain technology’s impact on interference and the brain, The Distracted Mind by Adam Gazzaley and Larry D. Rosen looks to the marginal value theorem. The MVT is used to examine food habits in animals but can be applied to humans’ excessive use of technology. Find out more about the marginal value theorem here.

Get It Right: The Importance of Accurate Data in Market Research

Are you skilled at knowing when data is misleading? Can you recognize false positives? When you test your ideas in various markets, you get data that can be invaluable. But, inaccurate data will send you off in the wrong direction. In the context of market research, economist John A. List discusses the importance of accurate data and shares strategies on how to recognize false positives. Read more to learn how to get more accurate data in market research.

How Bayesian Theory Helps Us Predict the Future

What is Bayesian Theory? How does it help forecasters make better predictions? Named after Thomas Bayes, Bayesian Theory is one of the best ways to determine the probability of an event in the future. In his book The Signal and the Noise, Nate Silver shares two lessons you can use to correctly apply Bayesian Theory to any situation. Let’s take a look at Bayesian Theory in detail.

The 5 Mental Errors That Cause Inaccurate Predictions

Have you ever made a prediction that turned out to be wrong? What mental errors thwart accurate forecasting? In The Signal and the Noise, Nate Silver examines mental errors that make your predictions inaccurate. These include making faulty assumptions, being overconfident, trusting data and technology too readily, seeing what you want to see, and following the wrong incentives. Keep reading to learn how these mental errors cause inaccurate predictions.

Challenges of Forecasting: Trying to Find the Signal in the Noise

What are the challenges of forecasting? How has political and social fragmentation made forecasting harder? Today, many forecasters are facing extreme difficulty in doing their jobs. Nate Silver believes there are two reasons for this. First, people are being encouraged to sort themselves into insular groups. Second, our trust in experts is at an all-time low. Let’s look at why Silver believes forecasters can’t do their job accurately anymore.

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