Super Bowl Indicator points to win-win
This age-old gauge sees market gains if either team wins in this year's matchup.
The indicator refers back to the time when there was a National Football League and an American Football League, and says that stocks see full-year gains when an NFL team wins. This indicator proves correct nearly 80% of the time.
If that holds true, then investors can't go wrong this year. Both the Pittsburgh Steelers and the Green Bay Packers hail from the old NFL (before the league merged with the AFL). If that isn't enough reason to cheer, the Pittsburgh Post-Gazette points out that the market has never had a losing year when the Steelers were in the championship game.
So full speed ahead, right? Not so fast. The Wall Street Journal says the man credited with coming up with the Super Bowl Indicator simply meant it as a joke. Leonard Koppett, a sportswriter for The New York Times, is thought to have proposed the indicator in the sports section of the paper in 1978.
Post continues after video:
"It’s a joke!" Koppett said in a 2001 interview. "I meant the whole thing as a satire on the fallibility of human statistical reasoning." He also said that "it’s too stupid to believe."
Koppett said he threw out the idea in a satirical smackdown of confusing correlation and causation. Koppett continued trying to discredit the Super Bowl Indicator until he died in 2003, the Journal reports.
Leave it to the finance professors to dissect this to death. One professor found that when an original NFL team won the Super Bowl, the market rose 2.9% in the following month. When an AFL team won, the market lost 4.6% on average.
But that finding was back in 1989. When the Journal asked him this year to update his numbers, the difference was much more subdued. An NFL victory brings a 1.1% gain in the following month, compared with a 0.1% loss when an AFL team wins, he said.
Not enough to mean anything, really. But that won't stop the Super Bowl Indicator. If Groundhog Day can become an actual holiday despite predicting the weather with only 39% success, then the Super Bowl Indicator will march on.
Setting the indicator aside for a moment, one study looked at market performance when the Steelers and Packers appeared in prior Super Bowls.
When the Steelers win, the market gains 26%, the study said. The market even rose 23% after Pittsburgh lost the Super Bowl in 1996. A Packers win brings a 23% gain, while a loss sees a 29% gain. Under that scenario, the best possible outcome for stocks would be a Steelers victory.
Copyright © 2014 Microsoft. All rights reserved.
After enjoying a smooth rise in stock prices since May, investors are about to be hit with another bout of volatility.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.