I have question regarding how to calculate probabilities from data.
My idea is to create a function that transforms range of data into essentially a CDF and then assign probabilities to values in this range based on this.
For example, let's say that someone is given a target of attaining $350 on a specific metric. We know historical values of this metric and we fit a specified confidence interval around historical perforance, which could bee $200-$500. I am interested in where $350 would fall on the CDF given this range of values. As a comparison, as the values of the target approach $500, I assignn a value of 1. If they approach $200, I assign a value of 0. The issue is that I have many range and many targets (the same could be $100-$1000 with a target of $300 or $800).
For example, a built dataset to emulate this is S&P 500 (sysuse sp500.dta).
This dataset has value on high, low and closing price. I would use high and low for the range and I'm interested in the probability of closing given the CDF defined around the high and low price.
Thanks for any assistance!
Code:
sysuse sp500.dta * Example generated by -dataex-. For more info, type help dataex clear input int date float(open high low close) double volume float change 14977 1320.28 1320.28 1276.05 1283.27 11294 . 14978 1283.27 1347.76 1274.62 1347.56 18807 64.29004 14979 1347.56 1350.24 1329.14 1333.34 21310 -14.220093 14980 1333.34 1334.77 1294.95 1298.35 14308 -34.98999 14983 1298.35 1298.35 1276.29 1295.86 11155 -2.48999 14984 1295.86 1311.72 1295.14 1300.8 11913 4.940063 14985 1300.8 1313.76 1287.28 1313.27 12965 12.46997 14986 1313.27 1332.19 1309.72 1326.82 14112 13.549927 14987 1326.82 1333.21 1311.59 1318.55 12760 -8.269897 14991 1318.32 1327.81 1313.33 1326.65 12057 8.099976 14992 1326.65 1346.92 1325.41 1329.47 13491 2.819946 14993 1329.89 1352.71 1327.41 1347.97 14450 18.5 14994 1347.97 1354.55 1336.74 1342.54 14078 -5.429932 14997 1342.54 1353.62 1333.84 1342.9 11640 .35998535 14998 1342.9 1362.9 1339.63 1360.4 12326 17.5 14999 1360.4 1369.75 1357.28 1364.3 13090 3.9000244 15000 1364.3 1367.35 1354.63 1357.51 12580 -6.790039 15001 1357.51 1357.51 1342.75 1354.95 10980 -2.5600586 15004 1354.92 1365.54 1350.36 1364.17 10531 9.220093 15005 1364.17 1375.68 1356.2 1373.73 11498 9.559937 15006 1373.73 1383.37 1364.66 1366.01 12953 -7.719971 15007 1366.01 1373.5 1359.34 1373.47 11188 7.459961 15008 1373.47 1376.38 1348.72 1349.47 10484 -24 15011 1349.47 1354.56 1344.48 1354.31 10130 4.840088 15012 1354.31 1363.55 1350.04 1352.26 10596 -2.0500488 15013 1352.26 1352.26 1334.26 1340.89 11583 -11.369995 15014 1341.1 1350.32 1332.42 1332.53 11072 -8.359985 15015 1332.53 1332.53 1309.98 1314.76 10755 -17.77002 15018 1314.76 1330.96 1313.64 1330.31 10391 15.55005 15019 1330.31 1336.62 1317.51 1318.8 10752 -11.51001 15020 1318.8 1320.73 1304.72 1315.92 11503 -2.880005 15021 1315.92 1331.29 1315.92 1326.61 11537 10.68994 15022 1326.61 1326.61 1293.18 1301.53 12572 -25.079956 15026 1301.53 1307.16 1278.44 1278.94 11122 -22.59009 15027 1278.94 1282.97 1253.16 1255.27 12085 -23.66992 15028 1255.27 1259.94 1228.33 1252.82 13659 -2.450073 15029 1252.82 1252.82 1215.44 1245.86 12313 -6.959961 15032 1245.86 1267.69 1241.71 1267.65 11308 21.79004 15033 1267.65 1272.76 1252.26 1257.94 11141 -9.710083 15034 1257.94 1263.47 1229.65 1239.94 12253 -18 15035 1239.94 1241.36 1214.5 1241.23 12949 1.290039 15036 1241.23 1251.01 1219.74 1234.18 12940 -7.049927 15039 1234.18 1242.55 1234.04 1241.41 9292 7.22998 15040 1241.41 1267.42 1241.41 1253.8 10918 12.390015 15041 1253.8 1263.86 1253.8 1261.89 11322 8.089966 15042 1261.89 1266.5 1257.6 1264.74 11141 2.8499756 15043 1264.74 1264.74 1228.42 1233.42 10859 -31.319946 15046 1233.42 1233.42 1176.78 1180.16 12290 -53.26001 15047 1180.16 1197.83 1171.5 1197.66 13609 17.5 15048 1197.66 1197.66 1155.35 1166.71 13974 -30.950073 15049 1166.71 1182.04 1166.71 1173.56 12595 6.850098 15050 1173.56 1173.56 1148.64 1150.53 15435.6 -23.03003 15053 1150.53 1173.5 1147.18 1170.81 11262 20.28003 15054 1170.81 1180.56 1142.19 1142.62 12359 -28.190063 15055 1142.62 1149.39 1118.74 1122.14 13463 -20.47998 15056 1122.14 1124.27 1081.19 1117.58 17239.5 -4.5600586 15057 1117.58 1141.83 1117.58 1139.83 13649 22.25 15060 1139.83 1160.02 1139.83 1152.69 11140 12.859985 15061 1152.69 1183.35 1150.96 1182.17 13142 29.4801 15062 1182.17 1182.17 1147.83 1153.29 13334 -28.880005 15063 1153.29 1161.69 1136.26 1147.95 12345 -5.340088 15064 1147.95 1162.8 1143.83 1160.33 12808 12.380005 15067 1160.33 1169.51 1137.51 1145.87 12549 -14.45996 15068 1145.87 1145.87 1100.19 1106.46 13861 -39.41003 15069 1106.46 1117.5 1091.99 1103.25 14255.9 -3.209961 15070 1103.25 1151.47 1103.25 1151.44 13680 48.18994 15071 1151.44 1151.44 1119.29 1128.43 12668 -23.00989 15074 1128.43 1146.13 1126.38 1137.59 10628 9.159912 15075 1137.59 1173.92 1137.59 1168.38 13496 30.79004 15076 1168.38 1182.24 1160.26 1165.89 12903 -2.48999 15077 1165.89 1183.51 1157.73 1183.5 11020 17.609985 15081 1183.5 1184.64 1167.38 1179.68 9139 -3.819946 15082 1179.68 1192.25 1168.9 1191.81 11096 12.130005 15083 1191.81 1248.42 1191.81 1238.16 19189 46.34998 15084 1238.16 1253.71 1233.39 1253.69 14868 15.529907 15085 1253.7 1253.7 1234.41 1242.98 13387 -10.70996 15088 1242.98 1242.98 1217.47 1224.36 10126 -18.619995 15089 1224.36 1233.54 1208.89 1209.47 12165 -14.890015 15090 1209.47 1232.36 1207.38 1228.75 12036 19.28003 15091 1228.75 1248.3 1228.75 1234.52 13452 5.77002 15092 1234.52 1253.07 1234.52 1253.05 10913 18.53003 15095 1253.05 1269.3 1243.99 1249.46 12668 -3.590088 15096 1249.46 1266.47 1243.55 1266.44 11813 16.97998 15097 1266.44 1272.93 1257.7 1267.43 13422 .9901123 15098 1267.43 1267.43 1239.88 1248.58 11379 -18.850098 15099 1248.58 1267.51 1232 1266.61 10821 18.03003 15102 1266.61 1270 1259.19 1263.51 9490 -3.0999756 15103 1266.71 1267.01 1253 1261.2 10063 -2.3100586 15104 1261.2 1261.65 1247.83 1255.54 11324 -5.659912 15105 1255.54 1268.14 1254.56 1255.18 10567 -.35998535 15106 1255.18 1259.84 1240.79 1245.67 9062 -9.51001 15109 1245.67 1249.68 1241.02 1248.92 8582 3.25 15110 1248.92 1257.45 1245.36 1249.44 10718 .51989746 15111 1249.44 1286.39 1243.02 1284.99 14053 35.55005 15112 1284.99 1296.48 1282.65 1288.49 13556 3.5 15113 1288.49 1292.06 1281.15 1291.96 11308 3.469971 15116 1291.96 1312.95 1287.87 1312.83 11749 20.869995 15117 1312.83 1315.93 1306.89 1309.38 12604 -3.449951 15118 1309.38 1309.38 1288.7 1289.05 11348 -20.329956 15119 1289.05 1295.04 1281.22 1293.17 11007 4.119995 end format %td date
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