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GDP vs. stocks

fiddler
I made a chart that compares GDP to the Dow Jones Industrial Average:

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( 25 comments — Leave a comment )
cos
Dec. 20th, 2008 02:56 am (UTC)
I bet this would communicate more clearly with a logarithmic scale.
soffistique
Dec. 20th, 2008 04:05 am (UTC)
hrm... k, I'm working on it.

Till I get the log scale working right, here's the data displayed in terms of growth:

soffistique
Dec. 20th, 2008 06:41 am (UTC)
Here it is. Pretty neat :)

cos
Dec. 20th, 2008 07:02 pm (UTC)
It would be fascinating to see the integral of this one. It looks like the dow is seesawing around the middle, visually, but we know that in fact it's growing, so it's spending proportionally more space above the middle than belo.
soffistique
Dec. 20th, 2008 09:13 pm (UTC)
It's a little bit tricky, because it's entirely a matter of coincidence that I was able to use the same units for both graphs on the Y-axis. The Dow a year ago was 14 thousand, while GDP was 14 trillion. It's beautifully convenient. I just consider the Dow to be shown in dollars while GDP is in billions of dollars.

So, I could arbitrarily move either line up or down in comparison to the other without changing anything meaningful. This is one reason I like the graph that's based on growth rather than absolute values; there's nothing arbitrary about the units.
cos
Dec. 20th, 2008 10:03 pm (UTC)
Right, but note that this comment is in response to the growth graph. Your unit of "volume" for the integral could be % by year.
soffistique
Dec. 20th, 2008 10:37 pm (UTC)
Ah! Got it.

I have to head out now, so I'll do the integral graph in a bit.

If I'd done a graph that showed, not percentage change, but rather simply showed slope (absolute change), then the integral of the graph would be the original graph itself.

My first worry about making an integral of a percentage-change graph is that the results could be misleading. For low values, a negative change of 50% means very little. For high values it means a lot. So we're not necessarily looking at a meaningful aggregate change if we take the integral of percentages.

For example, suppose you're looking at the average percent change over 6 months. The initial value is 1000. At the end of each month the values look like this:

100, 10, .1, .01, .001, 1000

The percentage change for each month looks like this:

-.1, -.1, -.1, -.1, -.1, 1000000

The average percentage change over the six months is:

166,700

Which is meaningless because the actual value both began and ended at 1000.
cos
Dec. 20th, 2008 10:42 pm (UTC)
... so it would make more sense to do an absolute value integral rather than a percentage change, true. Possibly just for the Dow because that's the sawtooth one.
soffistique
Dec. 20th, 2008 11:22 pm (UTC)
Ah! I think I may see what you're getting at. Here's the integral of nominal GDP and the Dow over time. It's like the volume of money that's accumulated in each one.



Is this what you were looking for? Let me know if it isn't so I can fix it.

I can also obviously make this in log-scale inflation-adjusted dollars, if you like. It's actually pretty quick and easy :)

K, I really have to head out now. Damn parties...
soffistique
Dec. 20th, 2008 07:56 am (UTC)
OK, here's a good one. It's GDP and the Dow shown in constant 2007 dollars.

(Last one. Really. :)

cos
Dec. 20th, 2008 07:01 pm (UTC)
Aww. What about one in logarithmic scale with inflation-adjusted dollars? :)
soffistique
Dec. 20th, 2008 09:03 pm (UTC)
Lol!! :D Here you go:

(Anonymous)
Mar. 10th, 2009 05:32 pm (UTC)
DJIA
http://2.bp.blogspot.com/_eCZSJq_Wcpw/SbXCG7k7yhI/AAAAAAAAAfw/qRNZIBKutew/s1600-h/djia-gdp-1885-2008.JPG


http://vicakin-thedow.blogspot.com/2009/03/djia-3-9-09.html
(Anonymous)
Feb. 14th, 2011 09:34 pm (UTC)
data
Thanks, where did you find the data related to your graph ?
soffistique
Feb. 19th, 2011 09:37 pm (UTC)
Re: data
I'm afraid it's been a long time since I posted this so I can't be sure. I usually I use sites like Google and Yahoo! finance for stock quotes. GDP was almost certainly from bea.gov. (See http://www.bea.gov/national/index.htm#gdp).

For non-stock data to be used in serious numerical analysis I generally limit myself to US government sources like bea.gov, bjs.gov and usda.gov (http://www.ers.usda.gov/Data/). These sites all have spreadsheets available for download.
(Anonymous)
Feb. 27th, 2009 04:28 pm (UTC)
does it have be the dow?
The Dow isn't very many companies. Depending on what you want to find out, try doing it with the S&P 500 if you just want to look at big "blue chip" companies or Wilshire 5000 if you want to see them all.
soffistique
Feb. 28th, 2009 09:56 pm (UTC)
Re: does it have be the dow?
Theoretically, that's true, but in reality if you look up the Dow, the S&P 500 and the Wilshire they mirror each other extremely well. I generally prefer the Dow because 1) everyone has heard of it and 2) it's been around in its present form for much longer than the other two.
(Anonymous)
Mar. 4th, 2009 12:14 am (UTC)
Dow Plot
I do not have a comment but an observation. I could be wrong. But the dip @ 2001
in the neighborhood 8,000 was not present in several other charts I've seen. For the DOW
soffistique
Mar. 8th, 2009 12:03 am (UTC)
Re: Dow Plot
That's interesting. Here's a plot of the S&P vs. the Dow since 1970:



Here I've zoomed in to show more detail:



And more:



Do you have any thoughts as to what's going on?

Edited at 2009-03-08 12:08 am (UTC)
(Anonymous)
Mar. 9th, 2009 05:52 am (UTC)
Re: Dow Plot
For the last chart, tech stocks became a much larger portion of the S&P index than the Dow, thus the relative under performance of the S&P.
(Anonymous)
Mar. 10th, 2009 05:06 pm (UTC)
Re: Dow Plot
Here are some links that might help.

http://2.bp.blogspot.com/_eCZSJq_Wcpw/SbXCG7k7yhI/AAAAAAAAAfw/qRNZIBKutew/s1600-h/djia-gdp-1885-2008.JPG


http://vicakin-thedow.blogspot.com/2009/03/djia-3-9-09.html


soffistique
Feb. 19th, 2011 09:55 pm (UTC)
Re: Dow Plot
You can verify the dip to 8000 (actually 7528) here: http://www.google.com/finance?q=INDEXDJX:.DJI

Is it possible you were looking at charts used by financial advisors? These usually show, not stock prices, but rather what you will actually earn if you invest in the markets... so they factor in dividends.
soffistique
Feb. 20th, 2011 02:18 am (UTC)
Re: Dow Plot
Here's an interesting side-by-side comparison of two different-looking charts:

http://2.bp.blogspot.com/_9SoEE9d_aQo/SRZGBzx-GUI/AAAAAAAABV8/AnLsKCsZZ4k/s400/graph08-div.gif
(Anonymous)
Aug. 18th, 2011 08:52 pm (UTC)
Recent article in SF Chronicle August 2011
Supports your GDP graph with the DJIA graph and growth. Thank you for these. I am a teacher and will be using your site/blog as reference. If you have any other graphs, please post.
soffistique
Aug. 20th, 2011 01:01 am (UTC)
Re: Recent article in SF Chronicle August 2011
Thank you so much! It is encouraging to know that someone finds this useful. What was the article you saw in the SF Chronicle?
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