Wednesday, November 16, 2011

The Market Is Up On News That I Wrote This Post

Everyday we hear an interesting causal claim "The market is up(down) on news that..." How do the financial reporters make this statement? Seem like there are three possibilities:

(1) They interview traders and ask them what influenced their thinking on the day.

(2) They examine stocks that are reasonably associated with the news of the day and imply the effect from the movement of those particular companies.

(3) They simply look for something important that happened and infer causation from correlation, post hoc ergo propter hoc.

Which one is it or is there another possibility?