What is 'Objective Probability'

Objective probability is the probability that an event will occur based an analysis in which each measure is based on a recorded observation or a long history of collected data. The concept of subjective probability can be contrasted with the idea subjective estimate. Objective probabilities are a more accurate way to determine the probability of a given outcome than subjective measurements. An objective probability will examine past data and use mathematical equations involving the data to determine the likelihood of an independent event occurring. An independent event is an event whose outcome is not influenced by prior events. Subjective probability, by contrast, may utilize some method of data analysis, but is largely based on a person's estimate or intuition about a situation and the likely outcome.

BREAKING DOWN 'Objective Probability'

Objective probability allows the observer to gain insight from historical data to gain insight of the likelihood of a given outcome. In contrast, subjective probability allows for the observer to gain insight by referencing things they have learned and their own experience.

Example of Objective Probability

For example, one could determine the objective probability that a coin will land "heads" up by flipping it 100 times and recording each observation. This would yield an observation that the coin landed on "heads" approximately 50% of the time. This is an example of objective probability. An example of subjective probability is when a person who is educated about weather patterns examines things such as barometric pressure, wind shear, ocean temperature, and predicts the likelihood that a hurricane will head in a certain direction.

When performing any statistical analysis, it is important for each observation to be an independent event that has not been subject to manipulation. The less biased each observation is, the less biased the end probability will be.

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