KDnuggets : News : 2007 : n20 : item30 < PREVIOUS | NEXT >


Stupid Data Miner Tricks and Motley Fool

Motley Fool, Getting Rich on Sheep, Butter, and Cheese, By Selena Maranjian October 12, 2007

I recently wrote about how the production of butter in Bangladesh was demonstrated to be an effective predictor of the U.S. stock market's future. I had run across that valuable piece of information -- stemming from the research of Cal Tech professor David Leinweber -- in the latest issue of our Motley Fool Stock Advisor newsletter service.

Well, as sometimes happens, I soon heard from the horse's mouth. Professor Leinweber emailed me a copy of a more recent and more detailed study he'd undertaken, along similar lines. This one was titled "Stupid Data Miner Tricks." (this version requires subscription).

(Here is an earlier, free version of "Stupid Data Miner Tricks: Overfitting S&P 500" ).

This time around, Leinweber had found much more accurate market predictors. His three variables, in fact, accounted for fully 99% of the S&P 500's performance over 10 whole years. The three variables? Butter production in Bangladesh, U.S. and Bangladeshi cheese production, and the population of sheep in the U.S. and Bangladesh.

I'll pause now, so you can stop laughing and can concentrate again on this important matter. It's funny, sure. But if you were letting these three factors guide your investments between 1983 and 1993, they seriously would have been able to make you very rich.

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KDnuggets : News : 2007 : n20 : item30 < PREVIOUS | NEXT >

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