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Can the Super Bowl Predict the Stock Market?

April 19, 2017

“Few prediction schemes have been more accurate, and at the same time more perplexing, than the Super Bowl Stock Market Predictor, which asserts that the league affiliation of the Super Bowl winner predicts stock market direction. In this study, the authors examine the record and statistical significance of this anomaly and demonstrate that an investor would have clearly outperformed the market by reacting to Super Bowl game outcomes.” Thus read the abstract to a paper published in 1990 by Thomas Krueger and William Kennedy in the very well regarded Journal of Finance.

“If the Super Bowl is won by a team from the old National Football League (now the NFC, or National Football Conference),” they wrote, “then the stock market is very likely to finish the year higher than it began. On the other hand, if the game is won by a team from the old American Football League (now the AFC, or American Football Conference), the market will finish lower than it began.”

It is important to note, though, that some AFC teams count as NFL wins because they originated in the old NFL, i.e. Pittsburgh Steelers, Baltimore Ravens (formerly Cleveland Browns, Baltimore/Indianapolis Colts).

Over the 22-year history of the Super Bowl to the date of submission of their study in 1988, they documented a 91% accuracy rate for their predictor.

What happened in 1989? The NFC team, San Francisco 49ers, beat the AFCs Cincinnati Bengals the stock market rose 27%.

Further confirmation of an idea first proposed by New York Times sportswriter Leonard Koppett, published as The Super Bowl Predictor by investment advisor Robert H. Stovall in the January 1988 issue of Financial World.

So what happened in 1990?  Well, the NFC’s San Francisco 49ers won a second consecutive victory, beating the AFC’s Denver Broncos, by 55 points to 10. But the stock market fell in 1990, by 4.3%.

But then the Super Bowl Predictor returned to form, correctly predicting the direction of the stock market in 1991, 1992, 1993, 1994, 1995, 1996, 1997. Since the launch of the Super Bowl that made for 28 correct predictions out of 31 (a success rate of 90.3%).

Since then, the Super Bowl Predictor has had a much more chequered record. predicted correctly only about half the time since 1997. In 2009, Robert Stovell, a strategist for Wood Asset Management in Sarasota, Florida, and an early champion of the Stock Market Indicator wrote: Nothing seems to be working anymore {in the stock market]. Used to be, I was only happy when it was over 90% (accurate), and when it was still above 80% I was pleased. But certainly 79% is still far above a failing grade. (quoted on January 12, 2009, in MarketBeat (WSJ.coms inside look at the markets).

Since then, the Predictor has called it right five times (2010, 2011, 2012, 2014 and 2015, and wrong twice (2013 and 2016). As of January, 2017, the indicator been right a total of 40 times out of 50, as measured by the S&P 500 index. This year the AFCs New England Patriots stormed from 25 points behind at one point in the game to beat the Atlanta Falcons by 34 points to 28 in overtime. That should presage a bad year for the stock markets in 2017. We shall see.

So is the Super Bowl Indicator a real forecasting tool, or is it simply descriptive of wat has happened rather than containing any predictive value?

You decide!

 

Further Reading

Krueger, T.M. and Kennedy, W.F. (1990), An Examination of the Super Bowl Stock Market Predictor, Journal of Finance, 1990, 45 (2), 691-697.

 

From → Forecasting

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