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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: kahunabear who wrote (602)	8/8/1998 10:53:00 AM
From: Ed Brynes	Read Replies (2) \| Respond to of 1722

A little more on Benford's Law if you please. I noted that it doesn't work for phone numbers. Nor does it work for human heights: most people are between 5 and 7 feet, elves and giants are rare. You need to consider the range of whatever set of random numbers you're talking about. I tried it out for per capita income by (US) state in nominal dollars using the info in BUSINESS STATISTICS OF THE UNITED STATES (1996 Edition), Bernan Press. For the 50 states in 1960 the per capita income ranged from $2379 to $4848; not a single value began with 1. For the 50 states in 1995 the range was $16683 to $33452, and 13 values began with 1. CONCLUSION: Whether or not the law applies depends on the data. I've also tried it out for a random sample of the atomic weights of chemical elements; in that case it worked. It seems to work best if the data are highly variable, i.e., values are scattered over a wide range. But it there any reason to suppose that it would apply for the values of a single quantity over time, like the DJI?