Fibonacci, Benford, and Baseball

Fibonacci, Benford, and Baseball

October is here!

My Cincinnati Reds made the play offs this year!  This is the first time this has happened since 1995.  I will not bring up the results of game 1 (or 2); suffice to say we need to play better!  Did you know that the Boston Red Sox have an expert (Bill James) who studies baseball statistics and applies the results to rate baseball’s best hitters and pitchers?  He published these numbers for years in a book called Baseball Abstract.  The result?  Well, the Boston Red Sox won their first World Series in almost 90 years a few years back.

Numbers matter in baseball and in nature, for instance, Leonardo Fibonacci was a 13th century Italian mathematician who wrote about and studied numbers.  He wrote a book called Liber Abaci (“Book of Calculation”) that covered the Hindu Arabic number system – he found these numbers simpler than Roman Numerals.  The book covered things that an accountant might enjoy (conversion of weights, interest, and money changing).  It also discussed what came to be known as the Fibonacci sequence that show ratios and can be used to determine resistance.

Stock traders frequently look to the “Fibonacci retracement” when predicting future share prices.  On 8/31/2010, the application of Fibonacci retracement (to 50% levels) showed that the S&P 500 might “bounce” off the 1,049 level.  Since then, the index is up to 1,163 (an 11% improvement) at the moment I type this blog.  I will also mention that the Da Vinci Code has a reference to Fibonacci sequence for the Tom Hanks fans that might be reading this.

From baseball, to the stock market, then to a Tom Hanks movie, I want to bring up a man named Frank Benford – he was an American electrical engineer (and Physicist, to boot) who “rediscovered” a statistical application that came to be known as Benford’s law.  Dr. Mark Nigrini (who is a very funny public speaker, by the way) studied Benford’s Law and applied it to Fraud.  In simple terms, numbers should fall in a “normal” pattern and when data does not fall in a normal pattern, there may be something irregular with the data.

Bottom Line, data analysis is used everywhere and technology provides a simple method to study data.  You do not have to have a PhD in mathematics to perform the analysis; you can actually use software tools to perform the analysis.  Contact me if you would like to discuss in more detail.

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