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Stocks The Hunt For Causality

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by Felix Salmon
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Philanthropy Without Money   Bad, Yes. Crisis, No.

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Oct 11 2007 12:00am EDT

Stocks: The Hunt for Causality

It's another day of volatility in the Dow, with an intraday movement of 200 points from high to low in the space of about 90 minutes. Barry Ritholtz is hunting for causality: is it something to do with the oil price? Chinese tech stocks? The ECB? Perhaps it's something to do with that perennial favorite, Turkish-Armenian relations?

Of course in reality there is no such simple causality. The markets move, there doesn't need to be a reason, and in fact it's far from obvious why anybody even thinks that there should be a reason. Tomorrow, stocks will go up, or they will go down, and the hunt for causality will begin anew. When will we learn that it's fruitless?

Update: We have a winner! Anthony Conroy, head trader at BNY Brokerage, says that it is.... wait for it... profit taking. Very helpful. Thank you, Mr Conroy.

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