Did you know that the Super Bowl has the power, through random association of teams fifty years ago, to influence the stock market? You didn’t? Well, for all the Tebow talk about power to influence results, this is fifty times worse. I’ll just let this excerpt from the Newark Star-Ledger explain this concept:
Legend has it that if a team from the original National Football League, such as the New York Giants, wins the Super Bowl, the stock market will end the year on a positive note.
But if victory is claimed by a member of the historic American Football League, such as the New England Patriots, then the year will turn sour for the markets.
Yes, much like the ancient legend of Excalibur, the scrolls foretold that when teams born of the unholy meeting of Lamar Hunt and Bud Adams were strong enough to lift the Super Bowl trophy overhead, the stock market would verily perform badly.
Academics also debate about how to handle expansion teams, which have no ties to the original leagues. Also upending the Indicator is the fact that the Pittsburgh Steelers is an original NFL team that plays in the American Football Conference. That means when the Steelers compete in the Super Bowl, as it has eight times including last year, the Indicator predicts an up-year for the markets, no matter which team wins.
Good to know that experts are debating weighty issues such as how to best fit data to make a made up connection look better. As it stands, because three former NFL teams joined the AFC when the leagues merged (Steelers, Browns and Colts), we’ve got a better chance of a good year. Also, well, the markets tend to go up over time.
The Indicator, however, is showing signs of rust. In 1990, when the Journal of Finance published the first academic study of the Indicator, researchers found it was accurate nearly 91 percent of the time between 1967 and 1988. But between 1989 and 2010, the accuracy dropped to 63.6 percent, Kester found.
Noooooooo. Wait, you mean to tell me that an out of sample test on an additional period failed to reproduce the results? That in the years since this was published in a Journal (are you kidding me?), that it has not performed the same, roughly in line with chance once you consider that the markets generally perform well and there are more former NFL than AFL teams. Stunning.
The fact that this guy in the story actually went back and calculated how much you would have made by employing the Super Bowl Market method wakes me weep. Wall Street is full of geniuses.
[photo via Getty]
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