By Jason Zweig | Jan. 28, 2011 4:11 pm ETT
Image credit: “Super Bowl XXXIX,” CTLiotta (2005), Wikimedia Commons
As MarketBeat reported somewhat tongue-in-cheek last week, “it appears that the only thing that can keep the stock market from rising in 2011 is if the [New York] Jets win on Sunday.”
That’s based on the Super Bowl Indicator, which holds that if a team from the original National Football League wins the big game, the stock market will go up for the year. But the Super Bowl Indicator has such a troubled history, it makes Plaxico Burress or Michael Vick look like Boy Scouts.
It’s often said the Super Bowl Indicator was first proposed in the Sports section of the New York Times in 1978 by Leonard Koppett, a sportswriter for the Gray Lady. But I’ve never been able to locate that original article, and so far as I know neither has anyone else, even though there’s a $100 reward available online if anybody turns it up.
Koppett died in 2003, but I did get to interview him about the Super Bowl Indicator back in December, 2001. He couldn’t cite an original New York Times article, either.
More importantly, a quarter-century after he invented the SBI, Koppett remained flabbergasted that anybody had ever taken him seriously.
His original articles were Swiftian satires on the dangers of confusing correlation with causation. Koppett told me that decades earlier he had been jawboning about spurious correlations with his friends Bill Veeck, the impresario who owned the Chicago White Sox, and Lawrence Ritter, the NYU finance professor who also wrote the brilliant baseball book The Glory of Their Times. They jokingly concocted a theory that baseball batting averages and annual returns in the stock market ought to be inversely correlated.
Eventually, Koppett noticed a second spurious correlation – how could the winner of a single overhyped football game possibly predict the performance of thousands of stocks? – and tossed both idiotic ideas into two smartly written columns: one in the Sporting News (Feb. 11, 1978), the other in Sports Illustrated (Apr. 23, 1979).
“It’s a joke!” exclaimed Koppett when I interviewed him on Dec. 7, 2001. “I meant the whole thing as a satire on the fallibility of human statistical reasoning.” He added, “It’s too stupid to believe.”
Before I got off the phone, Koppett was typing furiously away, saying that our discussion had inspired him to revise an article he had been writing that savaged his own “theory” of stock-market forecasting.
A couple days later, it arrived in my mailbox. I read it and couldn’t stop laughing; among other things, Koppett called the SBI “an embarrassment to rational thought.”
On Dec. 13, 2001, I interviewed Koppett again. I asked him how he felt about the fact that several people were taking credit for having invented the Super Bowl Indicator. “I don’t care to correct them,” he said. “If someone else wants to take credit, then they’ll get the hate mail from any investor who’s stupid enough to try the foolish thing. It’s too silly to believe.”
Even at the very end of his life, like Dr. Frankenstein trying to hunt down and destroy his own monster, Koppett was still desperately seeking to declare the Super Bowl Indicator dead.
Ed Dyl, a finance professor at the University of Arizona, found in 1989 that the stock market went up 2.9% in the four weeks after the Super Bowl when an original NFL team won – versus a (4.6%) loss when an original AFL team prevailed. (This covers the post-1978 period, after Koppett introduced the SBI.)
Dyl pointed out that these results might occur not because investors are idiotic enough to believe in the SBI – but merely because they think other people might be idiotic enough to believe in it.
When I asked him to update his results this week, Dyl found that “the anomaly seems to still be there, but weaker.” Factoring in all the games through last year’s Super Bowl XLIV, over the month following the big game, the market has gained about 1.1% on NFL victories and lost about (-0.1%) on AFL wins.
Somehow, even after being disowned repeatedly by its creator, the SBI lives on.
It probably won’t die the final, ignominious death it deserves until former American Football League teams go on a tear of consecutive victories. I’m a Giants fan myself, but next year I just might find myself rooting for the Jets.
Source: MarketBeat blog, WSJ.com, http://on.wsj.com/16rDf7D