Pedro on Substack: "Linkedin Poll on: “Would you know, based on an educated model, what would be the range that the stock price of the company you work for should be priced?” Out of the 345 persons (641 views) that saw this poll, only 9 voted :-) not a huge success, but a huge thank you to all th…"

Notes

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Linkedin Poll on:

“Would you know, based on an educated model, what would be the range that the stock price of the company you work for should be priced?”

Out of the 345 persons (641 views) that saw this poll, only 9 voted :-) not a huge success, but a huge thank you to all that have voted.

Although I would prefer having a bigger sample, will use Bayes' Theorem to update my beliefs and my conclusion is that 96.96% of respondents would say NO to the following question "Would you know, based on an educated model, what would be the range that the stock price of the company you work for should be priced?", based on the survey results... remember I started with a 90% baseline.

Nothing like using this method in your simple problems so you can make it a habit while making your more important decisions!

How did I arrived to the result:

Baseline is:

P(NO)=90% & P(YES)=10%

After the survey i have observed that

P(Survey|NO)=78% & P(Survey|Yes)=22%

Thus, applying Bayes Theorem, the new probability of NO is:

P(NO|Survey)= (P(Survey|NO)* P(NO)) / P(Survey)

P(Survey) = P(Survey|NO)*P(NO)+P(Survey|Yes)*P(YES)

thus

P(Survey) = (0.78*0.9)+(0.22*0.1)=0.724

thus