Here’s one thing that’s making me angry at the moment. In fact there are several things making me angry at the moment: McCain’s supporters; the greed that lead us into these financial end-times… and by comparison this particular matter is trivial. But at least it’s easier to solve than the others.
This particular annoyance is the graphs of share prices in the press and on TV. It is standard practice to start the y-axis at a number much higher than zero, in order to magnify the ups and downs of the market. Here’s one from today’s Guardian, showing the FTSE 100 over the course of Friday:
Dramatic isn’t it?
(Let’s quietly pass over the caption for this which, for unknown reasons, read “Averaged by age group, pounds per week.”)
We can see every little peak and trough. But it also looks as though by 14:30 the average was around one-fifth of the opening price — stocks had lost 80% of their value! Of course, they hadn’t. In reality they’d “only” lost around 9% of their value. Unless one is going to examine the y-axis and mentally imagine the bottom of the graph (which, in this case, would have extended off the bottom of the page by nearly a metre) the graph completely misrepresents the day’s activity. It lies.
(I’m using the Guardian as an example because I have it to hand but most, if not all, similar graphs suffer from similar design these days.)
Let’s have a look at what a graph using the same space would look like if the y-axis started at zero:
Now we have a clearer idea of what was at stake. We can see at a glance the kinds of losses and gains in proportion to the FTSE’s actual value.
This correct graph does have its down sides. If one is interested in the details they get lost when the rises and falls are compressed so much. Plus, to those unfamiliar with the stock market, like me, this graph doesn’t look particularly alarming. Apart from that steep fall just after opening I wouldn’t have realised this was a dramatic day. So it could be argued that dramatising the day by magnification conveys the real import.
But it is also fundamentally misleading. The best solution would be a combination of both graphs — one to show the overall picture, in proportion, with a zero-based y-axis, and one magnified to show the details. Otherwise, and especially when those exaggerated graphs are the only ones we ever see, we will never gain a good understanding of what market behaviour is and isn’t normal.
UPDATE: I’ve written a bit more about this and added some more examples of graphs. 16th October 2008.