Upper Bounds for Correlations between Binary Outcomes and Probabilistic Predictions

Abstract

There are many types of diverse models that yield probabilistic predictions for outcomes that are binary. We show that a correlation between the 0, 1 binary outcomes and the prediction probabilities can yield meaningful results. The upper bound for the resulting R 2 turns out to be a surprisingly simple expression for a class of situations which contain a quite general assumption on the distribution of the prediction probabilities. Some implications for subjective probability estimates are also given.