In order to make a prediction as to whether the market will go up or down on a particular day, we must convert these predicted probabilities into class labels, Up or Down. The following two commands create a vector of class predictions based on whether the predicted probability of a market increase is greater than or less than 0.5.

glm.pred <- rep("Down", 1250)
glm.pred[glm.probs > .5] <- "Up"

The first command creates a vector of 1,250 Down elements. The second line transforms to Up all of the elements for which the predicted probability of a market increase exceeds 0.5.

This cut-off values does not have to be 0.5, try a cut-off value of 0.6 instead:

Assume that:

• The ISLR2 library has been loaded
• The Smarket dataset has been loaded and attached