Question

The space shuttle Challenger exploded on January 28, 1986. An investigation of the cause examined four contractors: Rockwell International for the shuttle and engines, Lockheed Martin for ground support, Martin Marietta for the external fuel tanks, and Morton Thiokol for the solid fuel booster rockets. After several months, the investigation blamed the explosion on defective O-rings produced by Morton Thiokol. A study of the contractor's stock prices showed an interesting happenstance. On the day of the Challenger explosion, Morton Thiokol stock was down 11.86% and the stock of the other three lost only 2 to 3%. Can we conclude that financial markets predicted the outcome of the investigation?

Answer 1

We cannot conclude that

x = Financial market (Morton Thiokol down by 11.86% and the stock of other 3 lost only 2 to 3%)

predicted

y = Outcome of the investigation (Defective O - rings produced by Morton Thikol).

The fact is:

x = Outcome of the investigation (Defective O - rings produced by Morton Thikol).

has caused

y = Financial market (Morton Thiokol down by 11.86% and the stock of other 3 lost only 2 to 3%)

i.e.,

Since the O - rings produced by Morton Thiokol were found to be defective which caused Challenger explosion, Morton Thiokol stock was down.