cFA level 1 : probability

mehak.officiallink
Good Student
Posts: 31
Joined: Sat Mar 08, 2014 6:59 am

cFA level 1 : probability

Postby mehak.officiallink » Sat Apr 19, 2014 4:06 pm

What is the difference between joint probablility and conditional probability ?
In other words what is the difference between

Stock earns a return above risk free GIVEN that stock earns a positive return (CONDITIONAL PROBABILITY)
And
Stock earns a return above risk free AND that stock earns a positive return (JOINT PROBABILITY)

What is the difference between these 2 statements ?

edupristine
Finance Junkie
Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

cFA level 1 : probability

Postby edupristine » Mon Apr 21, 2014 6:59 am

In conditional probability the probability of a certain event is conditioned upon other event . Where as in the Joint probability both the events are bound to happen . . In the first statement the returns given are positive and they could be negative also .


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