Boxplots to the rescue

Phil over at the Gelman blog wondered how to improve this bewildering (but pretty) data display.  Data-rich it certainly is.  The table collects together the returns of 12 categories of funds over a 15-year period.  The fund returns are specified, as are the ranking of each fund within the dozen for each year.

If the purpose is to confuse customers, i.e. to claim that fund class does not matter, then this chart succeeds.  However, on closer look, one might observe that three of the 12 classes showed up disproportionately at the top rank so the chart is somewhat misleading.  Directional evidence is buried in the palette of colors; but how to separate the noise from the signal?

As usual, there is no single "best" graphic.  The "best" graphic is one where form matches function.  If my goal is to help customers understand their expected return and risk for different fund classes over the last 15 years, then the side-by-side boxplot works wonders.

CPI and T-bill stands out as relatively low median returns but exceedingly low dispersion of returns.  International was off the charts in terms of fluctuations and also had the third-lowest median return during this period. etc. etc.

If ranks were more of a concern than returns, the same chart can be reproduced using ranks on the vertical axis.

Comments

[Isaac Pinnock]

One purpose of these graphics is to show that investors may be better off investing in a fund of hedge funds rather than in any one particular style. However, as you mention, this point can easily be buried underneath the weight of data and colour.

Whilst working as a contractor for a large hedge fund my colleagues and I attempted to get round this problem by using interactivity to selectively display the information in this style comparison tool:

https://www.maninvestments.com/institutions/knowledge/hedge_funds/styles.jhtml

(enter as 'other areas' if asked, then click launch)

The first screen explains performance over the last year, whilst the deeper screens show how different styles performed over the last ten years (as per the visual above). Rolling over an individual style fades out the other styles, allowing users to concentrate on directional evidence. (Clicking on a style displays that style's performance against world stocks).

Whilst this format doesn't show as many classes as the original example, in this instance using Flash helped us explain the concept and allowed us to display more information.

[Kaiser]

Isaac, thanks for the link. The addition of animation most definitely helps us read the table. I'll have more to say in a few days.

[Isomorphisms]

This example is so good, it belongs in intro stat courses. Sure, the boxplots may be boring, but...they do show thedata.