THE STOCK MARKET AS A BAROMETER
Perhaps the most widely accepted principle in relation to the subject of our study is the doctrine that changes in the stock market forecast similar changes in the volume and direction of business activity. Nearly all the forecasting services have given emphatic or qualified endorsement to the claims made for this barometer; numerous economists have accepted these views; and the financial press continuously interprets the business outlook in terms of stock market indications.1
Before examining the evidence which can be adduced in support of this doctrine it will be well to examine first the available data by which the question can be tested. On this count, at least, the stock market deserves the high rating accorded it. There is no barometric item concerning which, so far as the United States is concerned, the relevant data are more quickly accessible and more abundant.
In the first place, the business of stock trading is highly concentrated. New York dominates the security trade as it does few others, and a single New York institution handles so large a proportion of the business that its transactions represent ade-____________________