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Methods and Finance pp 179–194Cite as

Dark Data. Some Methodological Issues in Finance

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Part of the book series: Studies in Applied Philosophy, Epistemology and Rational Ethics ((SAPERE,volume 34))

Abstract

The nature of the data of financial systems raises several theoretical and methodological issues, which not only impact finance, but have also philosophical and methodological implications, viz. on the very notion of data. In this paper I will examine several features of financial data, especially stock markets data: these features pose serious challenges to the interpretation and employment of stock markets data, weakening the ‘myth of data’. In particular I will focus on two issues: (1) the way data are produced and shared, and (2) the way data are processed. The first raises an internal issue, while the second an external one. I will argue that the process of construction and employment of the stock markets data exemplifies how data are theoretical objects and that ‘raw data’ do not exist. Data are not light and ready-to-use objects, but have to be handled conceptually and technically very carefully and they are a kind of ‘dark matter’. Dark data, for the note.

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Notes

  1. 1.

    See in particular [3, 4, 27, 29].

  2. 2.

    It is no coincidence that Sornette was a geophysicist before entering the study of finance and stock markets.

  3. 3.

    See Tversky and Kahneman [35, 36], Kahneman [15], Kahneman and Tversky [16].

  4. 4.

    See Gigerenzer and Todd [9], Gigerenzer et al. [10], Gigerenzer and Selten [11].

  5. 5.

    This type of mistake derives from the fact the agents tend to neglect the base-rate information.

  6. 6.

    See e.g. Quine [30], Newton-smith [23], Laudan [17] on this point.

  7. 7.

    A lagging indicator is a variable that changes only after the economy follows a particular pattern or trend, or only after it experiences a large shift. Lagging indicators can confirm long-term trends, but they do not predict them. Stock examples are the unemployment rate, corporate profits and labor cost per unit of output.

  8. 8.

    LEI has declined two months before recessions, as well as in other occasions where the trend was the opposite. For instance in 1984, it went down for three straight months, meaning a recession, while the economy continued go up.

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Authors and Affiliations

  1. Department of Philosophy, Sapienza University of Rome, Via Carlo Fea 2, Rome, Italy

    Emiliano Ippoliti

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  1. Philosophy Department, Sapienza University of Rome,Dipartimento di Filosofia Via Carlo Fea 2, Rome, Italy

    Emiliano Ippoliti

  2. National School of Development, Peking University, Beijing, China

    Ping Chen

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Ippoliti, E. (2017). Dark Data. Some Methodological Issues in Finance. In: Ippoliti, E., Chen, P. (eds) Methods and Finance. Studies in Applied Philosophy, Epistemology and Rational Ethics, vol 34. Springer, Cham. https://doi.org/10.1007/978-3-319-49872-0_11

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