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Investors diss Obama

by Ironman | October 9, 2008 at 8:23 PM
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I know Warren Buffett is backing Obama, but based on this chart, he seems to be in the minority, as every perceived Obama electoral success yields negative results on Wall Street

obama-intrade.jpg

H/T Club for Growth

 

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Not Necessarily

Submitted by gs on Fri, 10/10/2008 - 15:11.

My impression is that the Club for Growth is a serious organization, so it surprises me that they're disseminating something like this.

First of all, "correlation does not imply causation" when the events are simultaneous.

Second, the Club for Growth chart does not show correlations.  It shows overall trends.  The correlation coefficient quantifies the relationship between deviations from trend.  When the S&P500 price blips up on a given day, is the Obama price likely to move in a preferential direction relative to its own trend (if so, the two prices are correlated) or will it move randomly relative to trend (if so, they are uncorrelated)? 

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I've crunched some numbers on this but, being a conservative professional, I won't mention them without verification.  If anybody's interested, I can be reached at <checkTheCFG@xemaps.com>.

I downloaded the Obama time series from inception through October 9 from Intrade and the S&P500 from Yahoo Finance.  After reconciling the two series formats--my primary concern is that I may have done so incorrectly--, I used Mathematica 6 to compute &rho; and the Kendall & Spearman rank correlation coeffs.