Yes, news and articles about the stock market are hard to trust. But we can glean some useful information out of good reporting if we can just identify some of the junk! A simple way to notice rubbish just takes
- some common sense
- how statistics can be misused to make you believe anything: correlation vs. causation
Just go to any financial news or business news website and you’ll find headline after headline with one part about
- what the market did
- and another part of the headline with another news event.
The sneaky part is, by putting the two together, the headline makes us think the news event CAUSED the market to go up or down. But we all know, just because 2 things happened doesn’t mean one caused another or one is even related to the other!
Here are some examples from a great infographic by Bloomberg Businessweek: Correlation or Causation?
As the author Vali Chandrasekaran says,
Need to prove something you already believe? Statistics are easy: All you need are two graphs and a leading question
Correlation may not imply causation, but it sure can help us insinuate it.
Figure 1: Is Facebook Driving the Greek Debt Crisis?
Figure 2: Is Global Warming a Hoax Propagated by Scientists?
Figure 3: Did Avas Cause the U.S. Housing Bubble?
Figure 4: Would M. Night Shyamalan Start Making Good Movies Again if People Bought More Newspapers?
Figure 5: Did We TV Sabotage Michelle Bachmann’s Candidacy By Taking Staten Island Cakes Off the Air?
Figure 6: Is This Mountain Range Affecting the Murder Rate?
Note: These are NOT true! But it just goes to show you how easily information and statistics can be used to suggest something is true. Have you ever been tricked into thinking something similar? Let us know!