Skirt Lengths and Market Drops

By TAN Kee Wee

(MediaCorp 938LIVE’s Money Talks, Thursday, 20 September 2007, 7.45 am and 7.20 pm)

If your daughter goes to school wearing skirts that are way too short, please don’t stop her. It might be good for business and the stock markets.

This is because there is a theory which connects stock prices to the height of womens’ skirts or hemlines. This is the Hemline Theory. According to this theory, when hemlines go up, stocks go up too. When they go down, stocks go down too.

This theory was first coined by economist George Taylor from the University of Pennsylvania in the 1920s. The funny thing is that Taylor spent most of his life studying industrial relations. But most of us remember him for his Hemline Theory.

Anyway, Taylor argued that when the economy is doing well, women’s skirts were shorter because they could afford to wear and show off their expensive silk stockings.

But when times were bad, skirts were longer, because women wanted to hide their cheap stockings, or their lack of stockings.

Unfortunately, this theory cannot be tested rigorously because there are too few periods to undertake a serious study. But there appears to be a casual relationship between the two, even though stockings are no longer expensive.

For instance, in the swinging 1920s and 1960s, hemlines were high and so were the stock markets. In the 1930s and 1940s, during the depression years, hemlines were so low that women were tripping on their skirts.

It’s the same in the 1970s and early 1980s, during the first and second oil crisis. The popular styles then were ankle-length maxi-skirts.

Do bear in mind that the timing of this relationship isn’t always perfect. Sometimes, the hemline shift happened many seasons before the stock market. For example, in the 1920s, hemlines started heading south a few years before the great Wall Street crash in 1929.

Despite its flimsiness, this theory has its fans. And they all turn their attention to the twice-a-year fashion shows for directions. As far as this year’s fashion shows are concerned, the forecast is not good.

In February this year, the autumn and winter collections shown had hemlines that were lower. It was certainly a big departure from the micro-minis and short baby-doll dresses that dominated previous seasons.

The market corrections last month could be seen as the predicted outcome of the lower hemlines. Since then, stock markets have remained volatile. US housing has remained weak, and recent data suggest that the US could be heading towards a recession. But will it?

The latest Spring fashion shows in New York, which just ended last week, seem to suggest this. There were more designers introducing longer dresses and skirts, many extending to mid-calf or even to the ankles.

But the good news is that there were still plenty of short skirts on display. Hemlines may have fallen, but most are still way above the knee. So, if you follow the Hemline Theory, there is nothing to worry about.

The conclusion to draw from this is, going forward, just as there will be short and longer skirts, there will be shrinking and growing economies.

Actually, if we believe in looking at hemlines, we are no different from those who flock to the tree trunks at Jurong West, looking for their monkeys, and their gods.

The truth is, after going up, hemlines must come down. While there is no theoretical upper limit to the price of stocks, there is a theoretical upper limit to the height of women’s skirts.