Graphs Mislead

A good friend of mine is a highly placed producer at Nightly Business Report, the financial news show that runs every night on most Public Television stations&#185. When last I heard, it was the most watched daily financial show on TV! That means bigger than Neil Cavuto or Lou Dobbs or anything on CNBC.

Usually, I don’t get a chance to watch. It’s on at 6:30 PM and we have a nightly news meeting at that hour. This week, my boss is out-of-town. No meeting. Last night I got to watch NBR.

It’s a good show, nicely produced. I love the incidental music they use under graphics (though I’m a sucker for ‘industrial’ music to begin with). Because it’s financial and on Public Television it often covers less than sparkling topics featuring word parsing public officials.

There is a point to this entry – honest.

Last night they were talking about some stock and posted a graph showing its movement over time. I don’t remember the specifics, but let’s say the stock trades for $100. Over the time span of the graph it’s been down to $80 and up to $110. The graph was drawn to only cover the movement. So the bottom might have been $70 or $75 and the top $115 or $120.

The exact numbers here are for example and aren’t important. This is a conceptual problem.

By concentrating on the movement at the top of the stock’s real value the graph made it look more volatile than it really was. When you don’t do zero based graphing, rises look more sharp than they really are, declines more steep.

This is by no means limited to NBR. Years ago, when I knew someone at CNBC, I pointed this out to him. He said it was something they had mulled over, but had never changed.

When a graph has an arbitrary starting point, it allows ‘noise’ to be misinterpreted as valued data. That’s the wrong way to go.

In my opinion, financial TV shows should display graphs with zero basing. Instead of a linear scale on the “y” or vertical axis (1,2,3,4,5,6,…) they should use a logarithmic scale (1,2,4,8,16,32,64…) which is more representative of the way most of us value financial instruments.

Financial television isn’t the only place I’ve seen this scheme in use. There are charts, used to paint out a global warming scenario, also use a high starting point. It is done for shock and effect. Not all graphs are created equally.

&#185 – Thanks to viewers like You.

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