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.