What Does Football Have to Do with Stocks?

By moneygodmother

Some think the Super Bowl outcome can predict how the stock market will fare for the year. Can that possibly be true? Should you root for the New Orleans Saints or the Indianapolis Colts?

Actually, there has been a correlation called the Super Bowl indicator. This is the deal: considering who wins, it will be an up year in the market.

According to George Kester, Washington and Lee University finance professor, the last 43 Super Bowl winners have correctly predicted whether the market will go up or down 77% of the time. If you would have followed this up with investments, you would have an impressive return.

Professor Kester’s results will be published soon in the Journal of Investing, but here’s what he maintains: “If the team that wins the Super Bowl was originally in the National Football League (NFL), the stock market will rise. If the winner was originally tied to the American Football League (AFL), the market will drop.”

The Super Bowl phenomena was first tracked in the 1980s by researchers Thomas M. Krueger and William F. Kennedy, who determined that the winning team correctly predicted the market’s direction 91% of the time from 1967-1988.

Kester did a second test to take into account the AFL-NFL merger in 1970 to see if teams’ conference affiliation would have the same effect. It didn’t. Says Kester, “You have to do a research project like this with a sense of humor and realize that this is a spurious correlation. It would be difficult for me to recommend to any investors that they based their strategy on a football game. On the other hand, in hindsight, the superior investment performance of the Super Bowl market-timing strategy speaks for itself.”

In the last seven years, the Super Bowl Indicator has been correct five times. Last year, the Steelers beat the Cardinals, and the market went up.

Ok. Now, consider both the Saints and the Colts are originally teams from the NFL. Will investors win, no matter which team prevails?