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.
BREAKING DOWN '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.

International Capital Asset Pricing ...
A financial model that extends the concept of the capital asset ... 
Anomaly
A term describing the incidence when the actual result under ... 
Empire Building
The act of attempting to increase the size and scope of an individual ... 
Capital Asset Pricing Model  CAPM
A model that describes the relationship between risk and expected ... 
Empirical Duration
The calculation of a bond's duration based on historical data. ... 
Empirical Rule
A statistical rule stating that for a normal distribution, almost ...

Investing
Taking Shots At CAPM
Find out why many investors think the capital asset pricing model is full of holes. 
Investing
Capital Asset Pricing Model  CAPM
CAPM is a model that describes the relationship between risk and expected return. 
Investing
The Capital Asset Pricing (CAPM) Model: Pros and Cons
CAPM, while criticized for its unrealistic assumptions, provides a more useful outcome than either the DDM or WACC in many situations. 
Investing
The Capital Asset Pricing Model: An Overview
CAPM helps you determine what return you deserve for putting your money at risk. 
Markets
Explaining the Empirical Rule
The empirical rule provides a quick estimate of the spread of data in a normal statistical distribution. 
Trading
Financial Forecasting: The Bayesian Method
This method can help refine probability estimates using an intuitive process. 
Trading
Valuation Models: Appleâ€™s Stock Analysis With CAPM
The capital asset pricing model, or the CAPM, estimates the expected return of an asset based on the systematic risk of the assetâ€™s return. 
Markets
Does the Empire State Index Signal a Recession?
This morning, the New York Federal Reserve Bank reported the worst numbers in six years for its August 2015 Empire State Manufacturing Survey, indicating not only a potential economic slowdown ... 
Investing
Is Apple's Stock Over Valued Or Undervalued?
Despite several drawbacks, the CAPM gives an overview of the level of return that investors should expect for bearing only systematic risk. Applying Apple, we get annual expected return of about ... 
Investing
Introduction To International CAPM
ICAPM is one of several models used to determine the required return on an asset, discover its limitations and how to use it.

What is the formula for calculating the capital asset pricing model (CAPM)?
Learn about the capital asset pricing model, or CAPM, and how this formula is used to determine the expected rate of return ... Read Answer >> 
How do I use the CAPM (capital asset pricing model) to determine the cost of equity?
Learn about the elements of the capital asset pricing model, and discover how to use this formula to calculate a business' ... Read Answer >> 
How do I calculate the cost of equity using Excel?
Learn how to calculate the cost of equity in Microsoft Excel using the capital asset pricing model, or CAPM, including brief ... Read Answer >> 
How is the Capital Asset Pricing Model (CAPM) represented in the Security Market ...
Learn about the capital asset pricing model and the security market line and how the model is used in the calculation and ... Read Answer >> 
According to the CAPM, the expected return on a stock, that is part of a portfolio, ...
A. the covariance between the stock and the market. B. the variance of the market. C. the market risk premium. D. ... Read Answer >> 
Are perfect competition models in economics useful?
Take a look at some of the arguments made by the proponents and critics of the theory of perfect competition in contemporary ... Read Answer >>