by Kenneth R. French
Bayes rule is a way to update your model of the world when you have new information. Suppose we are interested in assessing the probability that a specific hypothesis is true. We start with an initial assessment, called our prior, which is based on all the data we have observed, books we have read, and our other life experiences. This post explains how we should update our initial assessment when we observe new data.
Eugene Fama and Ken French are members of the Board of Directors for and provide consulting services to Dimensional Fund Advisors LP.