Short Skirts & Thriller Economics
How the stock market determines fashion trends
Want to be setting the next fashion trends? Just look at the Dow Jones! Hemlines appear to be rather correlated to economic cycles — inching higher with booms and draping low during the busts. Presented as a theory in 1926 by George Taylor, the hemline index has often been tested. In its most recent phase (2010), researchers in the Netherlands quantified the correlation: a 3-year lag between the onset of economic troubles and the lengthening of skirts! The main takeaway: the economy is an indicator for hemlines — not the other way around. Meaning, do not make portfolio decisions looking at your girlfriend’s wardrobe. She should be setting fashion trends looking at your portfolio! For the mathematically curious, the R-Square value of the correlation is 0.3. Interestingly, it continues to hold now in 2014 with floor length maxi dresses currently in vogue. But aren’t short summer dresses a hot commodity as well? As fashion cycles faster with each season and becomes more customized, the lag should decrease. However, the eclectic trends catering to different tastes make the indicator harder to spot.
But it’s not just skirts. Cars, lipsticks, movie genres, music records, cigarette sales, and even parent care have been linked to economic cycles. While most weave a compelling psychological narrative, not many are backed by a data-backed economic study. Intrigued, we decided to explore movies and economic trends on a slow Saturday afternoon.
A quick run with our very intelligent algorithms didn’t pick up much of a movie economic trend. The most significant correlation is that thrillers are inversely correlated (R² = 0.1) with GDP growth, indicating that people watch more thrillers compared to other genres when the economy is doing poorly. Scary times that leave you on the edge of your seat, indeed!
Perhaps we need better data classification and exploration time. But clearly, very interesting possibilities for catering our offerings to the Zeitgeist of technology are in store. Sony, Universal, are you listening?
Plot shows the top 6 movie genres by fraction of total box office receipts for each year, and also US GDP growth*.
The hemline and the economy: is there any match?
Marjolein van Baardwijk, Philip Hans Franses
Econometric Institute Report 2010–40 June 27 2010
*Credit to Kevin Zielnicki & Daniel Kumor for analyzing IMDB data!