Question

2. After learning from an analysis that the correlation between the amount of grey hair a person is highly (positively) correlated with the amount of money (including all investments and assets etc.) one has, Joe quickly dyed his hair to white (with some grey shades) because he wanted to be rich.

1. Briefly discuss if his comment is valid, in regards to the use of correlation coefficient in statistics.
2. Suggest a (lurking) variable that might have a direct effect on both of the variables of interest.

Answer 1

Part a

This comment is valid in regards to the use of correlation coefficient in statistics. In general sense there is not direct relationship exists between two variables amount of grey hair and amount of money. There is only statistical relationship and not causation. Amount of grey hair is not a cause for amount of money. Remember, statistical relationship does not always implies causation, but causation always implies statistical relationship.

Part b

There would be lurking variables which is responsible for showing the relationship between the above discussed two variables. For this scenario, the affordability of expenditure may be lurking variable which have a direct effect on both of the variables of interest. If person have more amount of money, then he or she can afford to use and maintain high quality grey dye.