Arrogant and Delusional is No Way to Go Through Life
I was struck by the arrogance and self-assuredness of this proclamation by Romney, which he made at the infamous Boca Raton fundraiser on 17 May:
“If it looks like I’m going to win, the markets will be happy. If it looks like the president’s going to win, the markets should not be terribly happy.”
I know Krugman has just today referenced this quote (here: http://krugman.blogs.nytimes.com/), showing an apparent negative correlation between Romney’s Intrade favorability and the S&P 500 index. That’s wonderful, but I wondered if the Intrade players were reacting to the stock market, rather than to Romney’s perceived chances of winning; I’m guessing that a booming market is likely to favor any incumbent, whoever it may be.
Being a bit of a stats-dork, and also terribly inept at stock market predictions, I decided to take a closer look. I downloaded the S&P data from 18 May 2012 (the day after Romney’s statement) through yesterday (21 September 2012). I then downloaded the Gallup weekly running data for the Obama-Romney matchup. I then ran a time series (cross correlation) analysis.
In essence, and without going into some of the finer particulars, I find a 2-day-lag positive correlation between the poll numbers and the S&P index (r = 0.235, p = .008, n = 126). In English, Obama poll favorability correlates positively with the S&P index and, importantly, it is the index that tends to follow the polls. Obama goes up; the stock market follows. Obama goes down; the stock market follows.
However statistically significant, the strength of the association is not strong. As a rule of thumb, I consider a correlation coefficient of 0.250 to be of moderate strength. Of course, the relationship could also just be coincidence.
That being said, it cannot reasonably be denied that … not only was Romney wrong in his arrogant prediction, but the opposite of what he said would happen … seems to be happening. Way to go, Mitt. You’re even worse at stock market prediction than I am, and I’m not good.
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