Freakonomics: "Stocks Surged [Plunged] Yesterday Because....Why?"

Discussion in 'Trading' started by ByLoSellHi, Apr 3, 2008.

  1. April 2, 2008, 12:37 pm
    The Stock Market Surged Yesterday Because … Why?

    By Stephen J. Dubner

    I may be wrong, but it strikes me that the articles that appear in nearly every newspaper every day that describe a particular day’s stock-market movements are pretty much worthless.

    They try to pin a cause or two on the effect that’s just been observed, when in fact the effect may have little relationship with the narrow causes being credited. Consider, for instance, this A.P. headline and news brief that appeared on Yahoo! News at about 2:30 p.m. yesterday:

    “Stocks Surge to Start Q2″

    Wall Street began the second quarter with a big rally Tuesday as investors rushed back into stocks amid optimism that the worst of the credit crisis has passed and that the economy is faring better than expected.

    How does the A.P. really know that investors “rushed back into stocks” because they were optimistic that “the worst of the credit crisis had passed” and that the economy is “faring better than expected”?

    The A.P. folks sure didn’t learn this from reading their own business headlines. Here are five A.P. headlines that appeared directly beneath the stock-surge news brief.

    * “Celent: 200,000 US Banking Jobs at Risk”
    * “Manufacturing, Construction Weaken”
    * “Ford, Toyota U.S. Sales Down in March”
    * “Congress Has Big Questions for Big Oil”
    * “U.B.S. Will Write Down $19 Billion”

    Here are a couple of stock-market headlines I’d love to read one day:

    “Stocks Surge, Reasons Unknown; May Be Nothing More Than the Random Fluctuation of a Complex System”


    “Stocks Dive: Three First-Movers Sold Hard and Then Everyone Else Inexplicably Followed”

    But I could probably live to 150 and never see that happen.
  2. ElCubano


    "today dow down 200 points God knows why"...ok bring on deal or no deal we are done for the day...:p
  3. I've learned long ago that the far majority of post descriptions relating to the markets movements typically have absolutely nothing to do with why they moved. They are an exercise in creative fiction.

    What I would like to see is, stock xyz soared/tanked because MMs xyz, in aggreagate, 1st bought/sold huge blocks at 8am, followed by huge block buys/sells by mutual fund/hedge funds/yzx and ... , while the aggregate retail traders positions today were xamount short/long vs. their 1 week average position of yamount.

    Of course, we can only dream of objective reality based reporting. Until then, we'll have to settle for storytelling.

    They could at least make the headlines entertaining. Solar stocks soared today on rumors that superman and green lantern would join forces to clean up the environment.
  4. I think journalists are trying to create nice little logical sounding stories that can be easily digested by readers. "Ah it makes sense. It's logical. It sounds good". I guess it's human nature trying to make sense of everything.
  5. ElCubano


    although its not to say that news does not move markets and/or individual stocks....on the flip side; they may not move the way it should when that news comes when news is negative and the market goes know ; like when you and landis come out hooting and hollering...:D
  6. I'm russian living in russia and it's very funny for me to read same shit for russian stock market when some "analitic person" write on financial site that , say "futures for russian index has fallen because investors loose optimism in future growth of russain stocks" but I personally see that russian futures has strong correlation with ES/NQ and other US futures and this time russian futures has falled just because ES/NQ has falled, it's just simple arbitrage trading... but "average joe" really beleives all those "investor analitics" who try to explain movements in futures price by some common sense reasons but not by real trading reason...