But is this really an accurate statement? It is true that the Dow did rise 10.25 points at the opening bell on August 16th. At the same time, less than an hour later it dipped below its previous day’s close. That aside, however, it is the second half of the statement that is truly problematic.

First, 10.25 points translates into a change of only 0.09%, a figure that falls well within the norms of pure randomness for the market. The Dow actually ended the day below 58.61 points (-0.53%) with an overall fluctuation range of 127.83 points. In light of such volatility, a change of 0.09% is nothing more than noise and requires no explanation. In fact, any explanation offered to account for such a fluctuation is at the very least misleading. Even if the statement were true, it would have been a very short-lived influence of little consequence.

Second, the very idea that any movement in the market can be explained by one single factor is extraordinarily naïve. The dynamics of the market are a combination of many factors, including the general conditions of domestic and foreign economies, currency exchange rates, domestic interest rates, inflation, and a host of others. As such, it is very difficult to isolate a single cause. To do so, would require extensive multivariate analysis that examines the impact of each factor over time, both in isolation and jointly, while observing the stability of influence contributed by each factor. A confidence level and interval would then be need to be assigned to each variable and any factor with less than a 90% confidence level ignored. It is doubtful that the statement was a result of such an analysis.

Benjamin Disraeli is credited with saying, “there are three kinds of lies: lies, damned lies, and statistics,” to which someone added, “and politicians quoting statistics,” to which someone else added, “and journalists quoting politicians quoting statistics.” Apparently, journalists are more than capable of misusing statistics on their own without the help of politicians.

More Lies, Damned Lies