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Sometimes Moving Averages Are Just Lines On A Chart
The naivete of conventional financial media that lack robust quantitative evidence and statistical significance in forecasting is shown in the repeated reporting of these "single degree of freedom" / 2nd derivative measures / articles
Technical research certainly has its merits, but it is tempting (and sometimes convenient) to verify one's viewpoints as this chart and the review of it point out quite well.
BobC couldn’t be more on-target. He has it exactly right.
Charts can be designed to illuminate, but they can also be designed to distort. Admittedly, I am guilty of doing both in my professional career. I suspect most of us have participated in that lame game to enhance our arguments in a competitive work environment.
Charting is an art form that easily admits to those objectives. The simple choices of the axes scale and the timeframe represented control the visual impact of the data, and its likely interpretation. By including other data on the chart, false comparisons are encouraged.
Charts are a tremendous way to summarize and highlight complex data. But the chart reader must be constantly alert to unscrupulous charting techniques. Nothing new here except that it is extremely pernicious in the investment industry.
Take care to see if the purported differences displayed in the chart are truly meaningful differences or just a wicked selling point attempt. Take note of any broken axes. Check and understand the units used. How would the interpretation be impacted if the timescale were changed? Is the text in accord with the graph or does it conflict with it? Are other equally likely data interpretations plausible?
I’m sure you get the picture. As usual, buyer beware. While it is perfectly true that financial data can be presented as “just lines on a chart”, these data often contain actionable information when used in conjunction with other data sources and formats. Good decisions need good inputs, and the honest chart can provide one of those inputs. You must discriminate between honest and corrupted data presentations. Both happen.
Comments
BobC couldn’t be more on-target. He has it exactly right.
Charts can be designed to illuminate, but they can also be designed to distort. Admittedly, I am guilty of doing both in my professional career. I suspect most of us have participated in that lame game to enhance our arguments in a competitive work environment.
Charting is an art form that easily admits to those objectives. The simple choices of the axes scale and the timeframe represented control the visual impact of the data, and its likely interpretation. By including other data on the chart, false comparisons are encouraged.
Charts are a tremendous way to summarize and highlight complex data. But the chart reader must be constantly alert to unscrupulous charting techniques. Nothing new here except that it is extremely pernicious in the investment industry.
Take care to see if the purported differences displayed in the chart are truly meaningful differences or just a wicked selling point attempt. Take note of any broken axes. Check and understand the units used. How would the interpretation be impacted if the timescale were changed? Is the text in accord with the graph or does it conflict with it? Are other equally likely data interpretations plausible?
I’m sure you get the picture. As usual, buyer beware. While it is perfectly true that financial data can be presented as “just lines on a chart”, these data often contain actionable information when used in conjunction with other data sources and formats. Good decisions need good inputs, and the honest chart can provide one of those inputs. You must discriminate between honest and corrupted data presentations. Both happen.
Best Wishes.