Accounting Information Systems 1st Edition by Vernon Richardson,Chengyee Chang ,Rod Smith

Exercise 18

In the text, we mentioned that data mining is often used to analyze stock prices and stock returns. A Wall Street Journal article by Jason Zweig, "Data Mining Isn't a Good Bet for Stock-Market Predictions" (August 8, 2009), mentions that data mining has revealed that you can predict stock returns by tracking the number of 9-year-olds in the United States. Another data mining exercise predicts that stocks are more likely to go up on days when smog is not as bad. 4 While the statistical correlation may be valid, there must be a logical reason that a particular factor will predict stock returns.
Required:
a. Give your opinion on whether the number of 9-year-olds in the United States should or should not predict stock returns.
b. Give your opinion on whether a smoggy day should or should not predict stock market returns.
c. Give your opinion on what does predict stock returns, if anything.