DEFINITION of 'Skirt Length Theory'

The idea that skirt lengths are a predictor of the stock market direction. According to the theory, if skirts are short, it means the markets are going up. And if skirt are long, it means the markets are heading down. Also called the Hemline Theory.

BREAKING DOWN 'Skirt Length Theory'

The idea behind this theory is that shorter skirts tend to appear in times when general consumer confidence and excitement is high, meaning the markets are bullish. In contrast, the theory says long skirts are worn more in times of fear and general gloom, indicating that things are bearish.

Although some investors may secretly believe in such a theory, serious analysts and investors - instead of examining skirt length to make investment decisions - insist on focusing on market fundamentals and data.

RELATED TERMS
  1. Clean Your Skirts

    A slang phrase used in the equity market to refer to a trader's ...
  2. Spurious Correlation

    A false presumption that two variables are correlated when in ...
  3. Biased Expectations Theory

    A theory that the future value of interest rates is equal to ...
  4. Dow Theory

    A theory which says the market is in an upward trend if one of ...
  5. Market Segmentation Theory

    A modern theory pertaining to interest rates stipulating that ...
  6. Demand Theory

    A theory relating to the relationship between consumer demand ...
Related Articles
  1. Insights

    World's Wackiest Stock Indicators

    Can butter production help you predict the market's next move? Find out here.
  2. Investing

    7 Controversial Investing Theories

    We take a closer look at the theories that attempt to explain and influence the market.
  3. Investing

    Modern Portfolio Theory vs. Behavioral Finance

    Modern portfolio theory and behavioral finance represent differing schools of thought that attempt to explain investor behavior. Perhaps the easiest way to think about their arguments and positions ...
  4. Investing

    Efficient Market Hypothesis

    An investment theory that states it is impossible to "beat the market".
  5. Trading

    Manipulating Facts to Fit a Theory: A Dangerous Trading Practice

    This practice is common with experienced and new traders, and it can lead to huge losses. Find out how to avoid it.
  6. Investing

    Interest Rate Predictions With Expectations Theory

    The expectations theory uses long-term interest rates to predict future short-term interest rates.
  7. Investing

    Understanding the Random Walk Theory

    The random walk theory states stock prices are independent of other factors, so their past movements cannot predict their future.
RELATED FAQS
  1. What's the difference between agency theory and stakeholder theory?

    Learn how agency theory and stakeholder theory are used in business to understand common business communication problems ... Read Answer >>
  2. What is the chaos theory?

    The chaos theory is a complicated and disputed mathematical theory that seeks to explain the effect of seemingly insignificant ... Read Answer >>
  3. What are the differences between weak, strong and semi-strong versions of the Efficient ...

    Discover how the efficient market theory is broken down into three versions, the hallmarks of each and the anomalies that ... Read Answer >>
  4. Is a good's production cost related to its value?

    Learn about the history and debate regarding the metrics used to determine the value of a good and which theories place emphasis ... Read Answer >>
  5. Why is Game Theory useful in business?

    Game theory was once hailed as a revolutionary interdisciplinary phenomenon bringing together psychology, mathematics, philosophy ... Read Answer >>
  6. Does the tradeoff model or the pecking order play a greater role in capital budgeting?

    Understand the difference between the trade-off theory and the pecking order theory, and learn what these theories tell companies ... Read Answer >>
Hot Definitions
  1. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  2. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  3. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  4. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  5. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  6. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
Trading Center