Why blame the Sun for volatile stock markets?

2 September 2011 , Educational Issues

In my last article, I mentioned that a number of commentators have pointed to the Sun as a possible cause for the climate change we have been witnessing more and more dramatically. I responded briefly that the connection is at most very weak.

In the past month, however, the Sun was claimed (in some major news outlets) as the possible cause of the major drops and wild swings of the world’s stock markets. How could that be?

The ‘connection’ was claimed purely on coincidental grounds: in the same week that the markets went wild, the Sun experienced its strongest activity in almost a decade, throwing out ‘coronal mass ejections’, millions of tonnes of extremely hot matter and charged particles, which when they reach the Earth’s space environment produce disruptions in our satellites and our electric power grids, not to mention the beautiful auroras that can be seen in northern regions of the globe.

But since coincidences do not always convince people that there is a causal connection between the two events that happen at about the same time, the observers who blamed the Sun for the financial upheavals justified their claim on psychological grounds; they contended that the sun affects humans’ behaviour, which sometimes manifests itself in the financial and investment markets.

(Readers may recall that a few months ago I had discussed the erroneous belief that the moon has an effect on our bodies and psyches, so this kind of reasoning is not new.)

Now, this claim of such a solar effect is, fortunately, something that we can check by statistically analysing the time variations of the stock markets and comparing them with those of the Sun. For indeed, as I explained in my last column, the Sun goes through a cycle of activity every 11 years or so, going from ‘maximum’ (of solar flares, sunspots, and ejections) to ‘minimum’ to ‘maximum’, cyclically.

We have data for global temperatures, regional climate patterns, and local weather going back decades, centuries, and for some aspects many millennia, and we can analyse and compare the data with the Sun’s cyclical variation. Not surprisingly, we find little correlation between the two phenomena; indeed, if the Sun was directly or primarily responsible for ‘climate change’, we would notice an 11-year cyclical variation in temperatures, but we do not.

Ascertain facts

Likewise, we have data of the stock markets (especially the Dow Jones Industrial Average) going back a century or more, and we have data for the Sun’s activity going back at least 150 years. And indeed, a statistical comparison finds no correlation between the two.

Last but not least, the Sun has just come out of several years of minimal activity, and some commentators have rushed to warn us about upcoming solar eruptions, recalling some rare past events in history when major blackouts or telecommunications breakdowns occurred.

Some have even linked the current steady increase in solar activity with the Mayan-predicted end of the world in 2012. Needless to say, this is pure nonsense; the Sun will not reach its next maximum before mid-2013, and even then it will be about half as strong as the previous maximum of 2001. But then why are we humans so quick to correlate phenomena in such surprising manner? One important reason is our lack of understanding of how things work and our general inability to reason things through; many people just say “we don’t know everything, so the connection is possible …”

But one important thing we learn from studying nature and mastering the scientific method is that events which take place close to each other in time or space are not necessarily causally connected.

Another reason for our tendency to connect dots so quickly is that we humans developed a capacity to notice patterns around us, as that served us well in our long and difficult history. And that can be good if used well in trying to understand the world. But we often overdo it and see patterns where there are none and correlations that do not exist.

And last but not least, because life is very difficult already (for most people), it’s comforting to blame external factors, especially ones that we can do nothing about. It’s our ‘fate’, we tell ourselves unconsciously, so let’s accept it, be strong, and move on.

But it is in fact only when we refuse to accept such reasoning that we make progress and truly move forward. We need to instill in our children and students the habit of asking for evidence, of questioning “received wisdom”, of searching for explanations that can be checked and confirmed. Anything else is superstition, fatalism, irrational behaviour, and just primitive thinking.