Base rate
Also called: base rate fallacy
How often something happens in general. A success rate means little until it is compared with the base rate.
Base rates provide the comparison that claims often leave out. A forecaster who is right 90% of the time is unimpressive if the event happens 90% of the time anyway.
Example
If 85% of all shares rose last year, a tipster whose picks rose 90% of the time did only slightly better than chance.
Learn more in these lessons
- Misleading numbers and chartsHow can true numbers and charts still mislead?
- Comparing competing explanationsHow do you avoid believing the first story that explains a company's numbers?
Related terms
Spotted a mistake or something unclear? Report it by email. Here is how corrections work.