Hard Evidence

Inference with Hard Evidence

Next, we double-click the state JNJ>0.012 to compute the posterior probabilities of PG and KMB given this evidence. The gray arrows indicate how the distributions have changed compared to before, prior to setting evidence. Given the evidence, the expected values of PG and KMB are now 1.2% and 0.6% respectively.

If we also set KMB to its highest state (KMB>0.012), this would further reduce the uncertainty of PG and compute an expected value of 1.8%. This means that PG had an average daily return of 1.8% on days when this evidence was observed.