Statistics and ... statistics (#100; Topic F)

Last Friday, 3/3/06, the share price of Level 3 Communications was up by 5.4%; that of Google, by a mere 0.46%. Does that mean the former was dominant in the market price while the latter was an also-ran? Not so fast. One must know the base figure on which the percentage is calculated. On 3/3, Level-3 opened at $3.55 and closed at $3.74; 19 cents = 5.4%; Google, $376.45 and $378.18; $1.73 = 0.46%. So, with this added information, one appreciates that a 0.46% change in Google's stock probably has more sway than a 5.4% change in Level-3's. A couple of days ago, a Defense Department report noted that China had increased her defense budget by 35% -- no base figure was provided. Luckily, the Investor's Business Daily (1/21/06) had a front-page story on defense spending by country, using data by Stockholm International Peace Research Institute. In that report, USA led the pack with $455.3 billion, or 47% of the world's total defense spending. China was an also-ran, at #5 (behind UK, France, and Japan), with $35.5 billion, or 4% of the world's total. Even assuming that China's 35% increase in the DD report is to be added to the $35.5 billion in the SIPRI study, the new total would still be only $47.9 billion, barely 10.5% of U.S.'s total. This merely underscores the point that percentage figures must be handled with extreme care.
Posted at 7:41 pm, Sunday, March 5, 2006