medium · Quantitative Finance prob-stats
A quantitative trading signal correctly identifies outperforming stocks 80% of the time, but also generates a false positive for non-outperformers 30% of the time.
If the base rate of outperformance in the universe is 20%, what is the probability that a stock genuinely outperforms given that the signal has fired?
- 40.0%
- 80.0%
- 50.0%
- 20.0%
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