The Hathaway Effect: When Anne Hathaway is in the News, Berkshire Hathaway's Stock Price Goes Up

Dan Mirvish of The Huffington Post noticed a positive correlation between an increase in the stock price of Warren Buffett's company and actress Anne Hathaway doing something newsworthy. Here's a sampling of his findings:

Oct. 3, 2008 - Rachel Getting Married opens: BRK.A up .44%
Jan. 5, 2009 - Bride Wars opens: BRK.A up 2.61%
Feb. 8, 2010 - Valentine's Day opens: BRK.A up 1.01%
March 5, 2010 - Alice in Wonderland opens: BRK.A up .74%
Nov. 24, 2010 - Love and Other Drugs opens: BRK.A up 1.62%
Nov. 29, 2010 - Anne announced as co-host of the Oscars: BRK.A up .25%


Now all of that is interesting, but correlation does not equate causality. However, as John Bates, a computer scientist who has worked in the financial sector notes, the correlation could become causality soon enough:

Now, generally the correlations are between some statistical indicator and a stock or industry. "Let's say a new instrument comes to an exchange, you might suddenly notice that that an instrument moves in conjunction with the insurance sector," Bates posited. But it's thought that some hedge funds are testing strategies out to mine news and social media datasets for other types of correlations.

Does it happen a lot? Bates doesn't think so, but it's not out of the question. And, in any case, we're going to see a lot of strange trading strategies as hedge fund managers' computing resources grow ever more powerful and they are actually able to "correlate everything against everything." Oh, it's raining in Kazakhstan? Buy pork bellies in Brazil! And sell wheat in Kansas! Dump Apple stock! Why? Because the computer says that the 193 out of the last 240 times it rained in Kazakhstan, pork bellies in Brazil went up, and wheat prices and Apple shares went down.


Mirvish Link and Bates Link via Kottke | Photo by Flickr user Anthony Citrano used under Creative Commons license

For fun: in the comments, define "The Santoso Effect".

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This is junk statistics if I've ever seen it. There may be something to the automated trading idea, but these data are proof of nothing. How about the hundreds of other times Ms. Hathaway was in the news and the stock didn't rise so dramatically? How volatile is this stock normally? Are these percentage increases anything out of the ordinary?

Exasperated, I decided to d a quick test. I downloaded the BRK.A data from Jan. 1, 2008 to Mar. 18, 2011 from YAHOO Finance and did a trivial analysis of it in Matlab. Just looking at the difference between open and close prices, the stock was up 0.25% or more 308 times over this period. The stock was up 2.61% or more 47 times over this period. Those two percentages are the lowest and highest in Mr. Mirvish's "data."

As a scientist and math lover I've disappointed to see this story making the rounds with so little skepticism. It's a statement for the level of understanding of statistics and probability by the general public.
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