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Baysian-Slides 16 Bayes Intro
Baysian-Slides 16 Bayes Intro
The Plan
If point estimates are the truth and with repeated draws from
the population of equal sample length, what is the interval
that b lies in 95 per cent of the time?
Bayesian statistics
Bayesian statistics
Bayesians used to be fringe types, but are now more or less the
mainstream in macro,
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Bayes Rule
Deriving Bayes Rule
p (A, B) = p(A | B)p(B)
Symmetrically
p (A, B) = p(B | A)p(A)
Implying
p(A | B)p(B) = p(B | A)p(A)
or
p(A | B) =
which is known as Bayes Rule.
p(B | A)p(A)
p(B)
p(y | )p()
p(y )
p(y | )
| {z }
p()
|{z}
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Choosing priors
(1 x)b1 x a1
B(a, b)
where
B(a, b) =
(a 1)!(b 1)!
(a + b 1)!
a
,
a+b
b
x=
a1
a+b2
ab
(a +
b)2 (a
+ b + 1)
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
18
16
14
12
10
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
b
b
; a > 1, b
x=
a1
a+1
2
b
;a > 2
(a 1)2 (a 2)
0.7
0.6
0.5
0.4
0.3
0.2
0.1
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Conjugate Priors
Useful, but only so far as that the priors are chosen to actually
reflect prior beliefs rather than just for analytical convenience
Improper Priors
Improper priors are priors that are not probability density functions
in the sense that they do not integrate to 1.
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exp (y ) (y )
2
where and are either elements or functions of .
Model comparison
p(y | , Mi )p( | Mi )
p(y | Mi )
Model comparison
The posterior model probability is given by
p(Mi | y ) =
p(y | Mi )p(Mi )
p(y )
p(Mi )
p(Mj )
The rest of the course is about how to choose these inputs and
how to compute the outputs
Bayesian computation
Posterior simulation
There are only a few cases when the expected value of functions of
interest can be derived analytically.
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Example:
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-1
-2
-3
10
20
30
40
50
60
70
80
90
100
0
-3
-2
-1
-1
-2
-3
-4
-5
10
4
x 10
8000
7000
6000
5000
4000
3000
2000
1000
0
-5
-4
-3
-2
-1
Example:
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Summing up