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 ... 
Capital Asset Pricing Model  CAPM
A model that describes the relationship between risk and expected ... 
Mutual Fund Theorem
An investing theory, postulated by Nobel laureate James Tobin, ... 
A Priori Probability
Probability calculated by logically examining existing information. ... 
Beta
A measure of the volatility, or systematic risk, of a security ...

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". 
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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. 
Mutual Funds & ETFs
ETF Analysis: PowerShares S&P 500 Low Volatility
Find out about the PowerShares S&P 500 Low Volatility ETF, and learn detailed information about this fund that provides exposure to lowvolatility stocks. 
Mutual Funds & ETFs
ETF Analysis: SPDR Barclays Short Term Corp Bd
Learn about the SPDR Barclays ShortTerm Corporate Bond ETF, and explore detailed analysis of the exchangetraded fund tracking U.S. shortterm corporate bonds. 
Mutual Funds & ETFs
ETF Analysis: Vanguard IntermediateTerm Bond
Find out about the Vanguard IntermediateTerm Bond ETF, and delve into detailed analysis of this fund that invests in investmentgrade intermediateterm bonds. 
Investing Basics
How AQR Places Bets Against Beta
Learn how the bet against beta strategy is used by a large hedge fund to profit from a pricing anomaly in the stock market caused by high stock prices. 
Fundamental Analysis
Is India the Next Emerging Markets Superstar?
With a shift towards manufacturing and services, India could be the next emerging market superstar. Here, we provide a detailed breakdown of its GDP. 
Term
What are Metrics?
Metrics are tools that measure a company’s performance.

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