AppliedMultiple choice
A hit rate with a prior · Part 2 of 3
A researcher models the hit rate of a strategy’s daily direction calls with a Beta(2, 2) prior, centred on a coin flip. Over 20 days the calls are right 14 times.
A colleague uses a flat Beta(1, 1) prior instead. How does their posterior mean compare?
- AIt is 0.7, the raw hit rate, because a flat prior adds no information
- BIt is the same 2/3, since twenty days of data swamp either prior
- CIt is 15/22 ≈ 0.682, a little further from one half
- DIt is lower, because a flat prior spreads more weight on low hit rates
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