Wednesday, May 16, 2007

Biased financial reporting

Most financial reporting is absolutely terrible, not worth the electricity it takes to transmit it. There are many, many problems with financial reporting, but for this morning I want to pick out a subtle bias.

This is an image of Google Finance before US markets open in the morning.

Here's a close up.

By showing marks descending only to -0.25% but rising to +0.5%, it is implied that market declines will be less (and less likely) than increases. While this is true on a long term (multi-year) basis, for a single day it is false.

If even such a basic (and presumably objective) tool as a chart is so badly biased, what does this say about the state of financial reporting?

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