WSEAS Transactions on Business and Economics
Print ISSN: 1109-9526, E-ISSN: 2224-2899
Volume 15, 2018
Causal Control Charts: Application to Assessing Impact of Trump’s Election on Insurance Stock Prices
Authors: Farrokh Alemi, Timothy P. Coffin
Abstract: At its core, performance improvement requires a causal inference. The alternative causes of poor performance needs to be identified and statistically controlled so that the effect of the new intervention on performance can be assessed. Unfortunately, current control charts are not based on principles of causal inference. Objective: To provide a method of assessing causal impact of an intervention while controlling for alternative explanations. Methods: The impact of the intervention (cases) is compared to a counterfactual, simulated, control. The data are stratified by combination of alternative causes. Within each stratum cases after the intervention are compared to weighted controls, where weights are chosen so that the frequency of alternative explanations among cases and controls are the same. The methodology is applied to changes in stock prices after election of President Trump, with general trend in the economy and general trend in the healthcare stock prices being the alternative explanation. The impact of the election is examined after removing the effects of alternative explanations. Results: Impact of election on stock prices differs after we control for alternative explanations for rise of stock prices. Conclusions: Causal control charts may be useful in situations where several competing causes exists for changes in performance.
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Keywords: Causal analysis, Causal control charts, Counterfactuals, Stratification
Pages: 259-272
WSEAS Transactions on Business and Economics, ISSN / E-ISSN: 1109-9526 / 2224-2899, Volume 15, 2018, Art. #25