Suppose an Economics Forecaster Discovers That on Days When the Sunspot

question 31

Essay

Suppose an economics forecaster discovers that on days when the sunspot count is high stock market on the following day is bullish, that is stock market prices edge upwards. In addition, he also observes that on days with a low sunspot count the following day the stock market tends to be bearish, that is stock market prices tend to fall. The forecaster then concludes that there is a positive relationship between the sunspot count and stock market prices and proceeds to base his investment decisions on this premise. What kind of an error has this forecaster made?

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