You would hope that with all the wealth at stake in the capital markets, analysts, strategists and economists would be very thoughtful and rigorous in the way they look at and discuss statistics. All I can say is don’t get your hopes up. Print out a list of common statistical errors (many fueled by common behavioral biases we discuss in IOI 102) and compare that to a typical sell-side strategy research piece — you’ll be able to walk down the list of errors and check off examples one-by-one in the research piece!
An article on FiveThirtyEight entitled Are We Headed for Another Recession? takes a look at the “back of the envelope” statistical calculations made by some very prominent economists and pundits, and concludes that, while these arguments might be appealing from an intuitive (i.e., “X-System”) perspective, they don’t hold much merit in terms of rigorous statistical methods (i.e., “C-System”).
The conclusion of the article is amusing on a few levels, so I’ll offer a spoiler alert and post the quote here:
[A] vocal subset of economists has been forecasting a collapse for six years. One day, they’ll be right. But I’m guessing that day won’t come in 2016.
In IOI 102, IOI’s Introduction to Behavioral and Structural Factors, we talk about behavioral biases, X- and C-System processes, and the structural imperatives that drive people who *should* know better to offer up boneheaded statistical arguments. The good news is that when you start seeing these factors at work, you can avoid falling prey to them and even profit from them by “being bold when others are fearful and fearful when others are bold.”
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