1. Assume you are testing a new idea, and you believe ex ante it has a 25% chance of adding value. You run it through a

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1 Assume You Are Testing A New Idea And You Believe Ex Ante It Has A 25 Chance Of Adding Value You Run It Through A 1 (20.31 KiB) Viewed 77 times

1. Assume you are testing a new idea, and you believe ex ante it has a 25% chance of adding value. You run it through a backtest with a 5% rate of false positives and a 5% rate of false negatives. a. If the backtest result tests positive, with what probability do you expect the idea to add value? b. What if you actually test several variants of the idea until you find one-the 5th variant--that tests positive. With what probability do you now expect the idea to add value?