DEFINITION of 'Empirical Probability'
A form of probability that is based on some event occurring, which is calculated using collected empirical evidence. An empirical probability is closely related to the relative frequency in a given probability distribution.
INVESTOPEDIA EXPLAINS 'Empirical Probability'
In order for a theory to be proved or disproved, empirical evidence must be collected. An empirical study will be performed using actual market data. For example, many empirical studies have been conducted on the capital asset pricing model (CAPM), and the results are slightly mixed.
In some analyses, the model does hold in real world situations, but most studies have disproved the model for projecting returns. Although the model is not completely valid, that is not to say there is no utility associated with using the CAPM. For instance, the CAPM is often used to estimate a company's weighted average cost of capital.

Probability Distribution
A statistical function that describes all the possible values ... 
Modern Portfolio Theory  MPT
A theory on how riskaverse investors can construct portfolios ... 
Mutual Fund Theorem
An investing theory, postulated by Nobel laureate James Tobin, ... 
Capital Asset Pricing Model  CAPM
A model that describes the relationship between risk and expected ... 
Beta
A measure of the volatility, or systematic risk, of a security ... 
A Priori Probability
Probability calculated by logically examining existing information. ...

Investing Basics
Beta: Know The Risk
Beta says something about price risk, but how much does it say about fundamental risk factors? Find out here. 
Fundamental Analysis
Find The Right Fit With Probability Distributions
Discover a few of the most popular probability distributions and how to calculate them. 
Fundamental Analysis
The Capital Asset Pricing Model: An Overview
CAPM helps you determine what return you deserve for putting your money at risk. 
Options & Futures
An Introduction To Value at Risk (VAR)
Volatility is not the only way to measure risk. Learn about the "new science of risk management". 
Professionals
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Fundamental Analysis
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Fundamental Analysis
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Read about some of the differences between a company's cost of equity and its cost of capital, two measures of its required returns on raised capital. 
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What is arbitrage pricing theory?
Find out what arbitrage pricing theory is and how it can theoretically be used by investors to generate riskfree profit opportunities. 
Fundamental Analysis
What does a high weighted average cost of capital (WACC) signify?
Find out what it means for a company to have a relatively high weighted average cost of capital, or WACC, and why this is important to lenders and investors. 
Fundamental Analysis
How do economists and psychologists calculate diminishing marginal utility differently?
Find out why disagreements about the validity of the law of diminishing marginal utility usually boil down to arguments about definitions.