The head of our research team, Michael Rechenthin, Ph.D, aka Dr. Data, takes us on a thoroughly entertaining journey behind the curtain to see how some in the field of Data Science use methods to massage the numbers, obscure the true facts and mislead the public.
A pie chart showed that by changing the “pitch” of the pie an unethical data scientist can make a slice appear larger than the true largest slice. A graph of the unemployment rate in the U.S. using the U6 rate from 2009 to present showed that the rate was extremely low. A second graph added context by changing the dates from 2000 to present and showed the current rate is still above 81% of the months from 2000-2009.
Mike showed how changing the scale of a bar chart can be misleading and make it look like there is a greater difference between prices. Axis manipulation on selling SPY Premium in certain strikes showed that by eliminating certain strikes and making the chart less linear, it appeared as if there was a huge drop in premium when there really wasn't. A graph of a 1 Standard Deviation Strangle in the SPY showed the average P/L at expiration was $58. The median trade was actually more than double at $123 because the outliers can make the average look worse (or better).
A formula on predicting market direction was displayed. The formula showed that if the pool was large enough (10,000 people) that the odds of 1 person correctly picking the market direction 18 out of the past 20 years was almost 90%. An example showed the importance of understanding correlation. The odds of failure of five separate trades with a 50% probability of success was 50% if they are correlated and only 3% if they are not. A table listed the results of different strategies. An accompanying bar graph showed the variation of data. Knowing the variation of data meant that the differences in results of the strategy was misleading. Mike warned about statistically significant results. By lowering the P-Value or “modifying” model inputs one can change the significance.
Watch this amazing segment of The Skinny On Options Data Science with Tom Sosnoff, Tony Battista and Dr. Data (Michael Rechenthin, Ph.D) as Mike “breaks down the doors” of Data Science to unveil the secret manipulations of those wishing to “prove” something, might use.
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