A Lesson on Data Mining

Here’s a cute stat I saw over at Motley Fool. Cal Tech professor David Leinweber crunched the numbers and found that the singe-best predictor of stock prices is butter production in Bangladesh. “When butter production was up 1%, the S&P 500 was up 2% the next year. Conversely, if butter production was down 10%, you could predict the S&P 500 would be down 20%.”
Coincidence? Well, yes. But this isn’t too far from the kind of research that’s been driving many hedge funds.

Posted by on September 24th, 2007 at 8:42 am


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