Mathematical Context Can Totally Change The Story
Some news headlines are better at grabbing readers’ attention than others. Alarming headlines are particularly great at drawing eyeballs.However, investors should always approach these stories with a bit of skepticism, as they may lead to incorrect conclusions. Because you can make any piece of data say what you want if you try.Headlines can sometimes make the news sound worse than it really is, and other times make it sound better. They may also present information without adequate warning about the quality of the source.With that in mind, a few headlines last week warrant some caution.Consider the margin of errorHere are two about home sales data released on Tuesday:"US new home sales fall marginally in October" – Reuters"U.S. New Home Sales Pick Up After Summer, Delayed Data Say" – WSJBoth are factually accurate based on the data. And you can see how tones can easily shift when you tweak the context.But story framing is not the issue I want to flag. Check this out from the Census's press release:(Source: Census)Keep in mind that the Census' new home sales figures are derived from surveys, which means the reported figures are extrapolated from a sample, and they therefore come with a margin of error. Those parentheticals reflect that margin of error at the 90% confidence interval. (More in their explanatory notes here.)In other words, while new home sales reportedly increased by 0.1% in October, there's a pretty good chance actual new home sales grew by as much as 14.3% or fell by as much as 14.2% from the previous month. Also, the base number may still be revised upward or downward.What are ...Full story available on Benzinga.com
