What is the Addition Rule for Probabilities? Given multiple events, the addition rule for probabilities is used to compute the probability that at least one of the events happens. Probability can be defined as the branch of mathematics that quantifies the certainty or uncertainty of an event or a set of events. Related Concepts Before…
What is Anchoring and Adjustment? Anchoring and adjustment refers to a cognitive heuristic that influences how people assess probabilities in an intuitive manner. According to the anchoring and adjustment heuristic, people employ a certain starting point (“the anchor”) and make adjustments until they reach an acceptable value over time. The heuristic was first hypothesized by…
What is Physical Deterioration? Physical deterioration refers to the loss in value of a real estate property due to the physical wearing out of a building. It can also describe the normal wear and tear that buildings experience as they age. For example, the heating and cooling systems wear out at some point in the…
What is Applied Economics? Applied economics is generally considered to be the study of economic principles when they are applied to specific scenarios or situations. In the study and research of economics, there exist two fundamental areas of distinction. The first being “core,” and the second being “applied.” When something is a part of applied…
What is Advanced Internal Rating-Based (AIRB)? The Advanced Internal Rating-Based (AIRB) approach is a risk measurement tool for banking and financial institutions that helps in the measurement of credit risk. It is done under the Basel II Capital Rules for institutions and companies that specialize in banking globally. Risks of Default The advanced internal rating-based…
What is Adjusted Gross Income (AGI)? Adjusted Gross Income (AGI) refers to an individual’s total gross income less specific deductions. AGI is the starting point to compute the tax due from an individual taxpayer in the United States. The Internal Revenue Code (IRC) defines two concepts – gross income and adjusted gross income in 26…
What is an Annual General Meeting (AGM)? An Annual General Meeting (AGM) is a meeting conducted annually where the members of an organization gather to discuss and vote on key issues. Public companies hold annual general meetings for shareholders. At the meetings, many individuals who comprise the company’s leadership give speeches and answer questions from…
What is Bagging (Bootstrap Aggregation)? Ensemble machine learning can be mainly categorized into bagging and boosting. The bagging technique is useful for both regression and statistical classification. Bagging is used with decision trees, where it significantly raises the stability of models in improving accuracy and reducing variance, which eliminates the challenge of overfitting. Figure 1….
What is Accredited in Business Valuation (ABV)? Accredited in Business Valuation (ABV) is a credential given to accountants who possess a considerable level of knowledge in valuation and the professional standards that surround it. It is granted through the administration and successful passing of a two-part exam and by obtaining relevant work experience. Generally, individuals…
What is Overfitting? Overfitting is a term used in statistics that refers to a modeling error that occurs when a function corresponds too closely to a particular set of data. As a result, overfitting may fail to fit additional data, and this may affect the accuracy of predicting future observations. Overfitting can be identified by…
