Spotting Patterns

Continuing on the theme of how capable we are of determining what is meaningful data, and what is statistical noise, check out this survey being conducted by Swiss graduate students.  The user is given charts and asked to state whether they are looking at a stock chart or merely a randomly created line graph. 

We could do this for hours!

(Found via Marginal Revolution)

Update:  Try this a few times and, in the comments, let us know how you did.  I'm 4 for 6 in correctly identifying which chart is the 'random walk'.

Comments

[imcculley]

I was 2 for 3, but seriously how could you tell the difference? I bet over the long run most people are as a good as a coinflip.

[Kevin]

I was 4 for 5, I was never 100% sure of my answer but got it right. I wonder why we can get it right more than 50% of the time.

[The Stalwart]

I suspect it will work out to about 50% correct as well. I hope this work is published and publicized.

[mike simonsen]

cool stuff. I'm 3 for 4 but really needed the trading volume to feel like I could see it.

[Kevin]

Agreed on the trading volume, that makes it pretty easy as the major volume jump corresponds to the steep price increase/decrease on the real data while the fake data trails the volume jump. I'd bet people are about 50% without the volume and much higher with. My miss was w/o the volume.

[hedged]

I think the real ones have more large gaps...i.e. the real distribution of stock returns are kurtotic whereas I presume they generate returns from a normal distribution.

Personally I got 4 out of 5.

[Steve]

I got 14/20. The trading volume helped, but it would have been even more helpful if the site allowed trendlines to be drawn. Other than CTA's, does anyone know of any specific investment managers who produce outsized returns by relying heavily on technical analysis? I'd be more of a believer in it if someone like Jim Simons utilized it in his trading. Jeff Vinik supposedly incorporates TA into his (very successful) methodology.

[Brazos]

I got 5 of 7 correct. I wonder how many people are going to "correctly" predict the future of each of these systems. I'm guessing 20%.

[Jane]

The link doesn't work anymore. :(

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