The effectiveness of data mining has been criticized by the Wall Street Journal. In one article, the author notes that academic studies have shown that by using data mining, analysts could accurately predict changes in the stock market based on either the population of sheep in Bangladesh, the number of nine-year-olds at a given time, or wheters it is smoggy on a given day. While the statistical correlation may be valid, there must be a logical reason that a particular factor will predict stock returns.
Required:
a. Do you think these findings represent valid relationships or spurious correlations?
b. What measures do you think might be valid predictors of stock market returns?