Chernoff Face Features Mapped To ValuEngine Model Variables
The Faces Of The Thirty DJIA Stocks
Let's take a break from High Alpha-Low Beta stocks for this week and have some fun with statistics, with a visualization tool called Chernov Faces. Chernoff Faces help us to visualize multivariate data, by putting a 'face' to it. Here's the explanation from Wikipedia:Chernoff faces, invented by Herman Chernoff, display multivariate data in the shape of a human face. The individual parts, such as eyes, ears, mouth and nose represent values of the variables by their shape, size, placement and orientation. The idea behind using faces is that humans easily recognize faces and notice small changes without difficulty. Chernoff faces handle each variable differently. Because the features of the faces vary in perceived importance, the way in which variables are mapped to the features should be carefully chosen (eye size and eyebrow-slant have been found important). For the drawing of the face of each DJIA stock, I have selected 14 of the ValuEngine model variables and each stock's values of these variables constitute its face. The whole matrix is standardized by scaling each column from 0 to 1 so that face features are relative to the population. The face feature and the model variable that is associated with it is shown in the top Table. We have to remember that for some variables, the smaller the value, the better e.g. valuation % and volatility. Let's see what we can glean from the faces of the DJIA stocks:1. I think the most unique face belongs to Alcoa: The slanted eyes represent its small market cap. The small face shows its undervaluation.2. Caterpilar has an extremely long nose, and that's due to its high Beta. 3. Microsoft's eyes are extremely far apart because its got good 5-year returns.4. Bank of America's small face shows extreme undervaluation.And so you can compare the faces by yourself. The spreadsheet of the actual values is available from me if anyone wants it. All in all, I would think that (1) they all look quite alike except for weird people like Alcoa and Bank of America. Everybody is smiling because the last three columns that involved features of the mouth were not used. General Electric looks honest and Coca Cola looks like the jovial pastor from the church on Main Street. I don't like the looks of Hewlett Packard, the narrow jaw relative to the wide forehead.
And finally for a Gallery of The Art of the DJIA, like the Contour Plot in the top image, see it on my other Blog at http://www.fu-lu-shou.net/2010/12/stock-market-data-as-art.html Until then, Have A Merry X'mas and a Happy New Year.
