Bayes' Theorem

Bayes' theorem alternatively known as Bayes' law or Bayes' rule is named after Thomas Bayes (statistician and philosopher). Thomas Bayes described the probability of an event, based on prior knowledge of conditions that might be related to the event.

For example, if the trend of a particular stock has always been in an upward direction during Christmas, then it is expected that in the coming years during Christmas that stock will remain in an uptrend.

Bayes' theorem is stated mathematically as the following equation:

Where,

A and B are events.
 

 is a conditional probability where one event must occur before another event. For instance, the increase in the price of oil increases the price of petrol and diesel. In this case, the probability of event A will be there only when event B takes place.
 

  is also a conditional probability where the probability of event B will be there when event A takes place.

 and  are the probabilities of observing A and B respectively without any given conditions