Commentary

The Wall Street Journal's Statistical Fog

Don Phillips

I grew up a baseball fan. I fell in love with the numbers that document the game. I relished how people like Bill James exposed the truth behind the mythology of the sport. While I'm certainly no mathematician, over time I developed a sense of how numbers tell a story. I also saw how most people misunderstood what the statistics were saying.

Subsequently, throughout my career at Morningstar, I've realized that most investors lack a basic numerical grounding and are therefore vulnerable to misleading statistical analysis. I've even seen industry professionals fall prey to flawed use of stats. Unfortunately, these flaws are on clear display in The Wall Street Journal's recent high-profile piece on Morningstar and our star ratings.