Commentary: Don't bet the ranch based on Super Bowl winner

Colorado Springs Business Journal, Jan 13, 2006 by Mike Boyd

On Monday, the Dow Jones Industrials closed above 11,000 for the first time since June 2001.As might be expected, there was a lot of talk about breaking a so-called psychological barrier. What I didn't notice, however, was anyone mentioning that the Dow's good fortune might be a result of the January effect or a harbinger of The Super Bowl Indicator or any other type of trend. Now I'm not an economist or a financial guru (heck, I don't even play one on TV or in magazines), but I have always been fascinated by trends.I know, Allan Roth says that trends are unreliable, because they only predict the past (which anyone can do with 100 percent accuracy) and there's no way of knowing what will happen in the future, and anyone who tells you they do know what the market will do tomorrow or next week or next month or next year is full of bunk. So Allan, I'm not investing based on the trend thing; I just think it's cool that you can really take just about any data you choose and extrapolate a trend. And of course, being a former sports writer, I find the Super Bowl predictor to be quite interesting. (I just can't seem to get excited about the January effect thing. I tried, but the explanations are a bit dry and a bit academic.)And some folks really do take the Super Bowl predictor seriously. According to a story I found on The Mathematical Association of America's Web site written by Ivars Peterson in 2000, Paul M. Sommers, an economist at Middlebury College in Vermont, came up with the following equation to analyze the Super Bowl/stock market data:DJIA = b0 b1AFCE b2AFCC b3AFCW b4NFCE b5NFCC b6TOTALPTS b7TOTALPTS*ROOTS e.Yeah. I'm not even going to try to figure that one out. Let's just trust ol' Paul and move along.The simple explanation is that when a team from the old National Football League (most of today's NFC teams) wins the Super Bowl, the stock market goes up for the year. When a team that was a member of the American Football League (most today's AFC teams) wins the Super Bowl, the stock market declines for the year. Of course, factor in the AFC teams that were original NFL teams (the Ravens - when they were in Cleveland and were the original Browns, the Colts - when they were in Baltimore) and Pittsburgh, and the whole thing does become a bit complicated.And with expansion (teams that weren't members of the old NFL or the AFL) and realignment (teams moving from one conference to another because of expansion) the days of using the Super Bowl as a predictor of stock market success or failure are probably numbered. But, thanks to Sommers, the NFL and Dow Jones, even a liberal arts major can compare winners and performance, do a little math and come up with a percentage of accuracy.So, doing a little simple math (which we liberal arts majors take great pride in showing off), it looks like the Super Bowl predictor has been right almost 79.5 percent of the time. Of course, I'm being generous and giving credit to old NFL teams that were put into the AFC if the percentages went up and not counting those same teams if the percentages went down.Using the strictly AFC vs. NFC calculation, if my math is correct, the predictor was only right about 69.2 percent of the time.The results used to be a lot better. For the first 23 Super Bowls (using the generous formula), the predictor was on target in every year except for 1970 and 1978, which is a 91.3 percent accuracy rate.And through Super Bowl XXXI, the predictor was still 90.3 percent accurate.The wheels fell off the theory beginning in 1998. And the blame lies, dare I say this in Colorado, squarely at the feet of the Denver Broncos. The St. Louis Rams also didn't help any by not letting the Tennessee Titans win in 2000. I will give the Baltimore Ravens a push for 2001, since they are technically an AFC team.The accuracy rate for 1998 through 2005? 37.5 percent at worst, 50 percent at best (depending on how you classify the Ravens). Looks like we've managed to whittle the trend down to a coin flip. I wonder what ol' Paul would think about that?Mike Boyd is editor of the Colorado Springs Business Journal. He can be reached at mike.boyd@csbj.com or 329-5206.[table]Football FactorHow has the Superbowl affected the market?Winning TeamDJIA(% change)1967Green BayNFL15.201968Green BayNFL4.271969NY JetsAFL-15.191970Kansas CityAFC4.821971BaltimoreAFC*6.111972DallasNFC14.581973MiamiAFC- 16.581974MiamiAFC- 27.571975PittsburghAFC*38.321976PittsburghAFC*17.861977OaklandAFC- 17.271978DallasNFC- 3.151979PittsburghAFC*4.191980PittsburghAFC*14.931981OaklandAFC- 9.231982San FranciscoNFC19.601983WashingtonNFC20.271984L.A. RaidersAFC-3.741985San FranciscoNFC27.661986ChicagoNFC22.58Winning TeamDJIA(% change)1987NY GiantsNFC2.261988WashingtonNFC11.851989San FranciscoNFC26.961990San FranciscoNFC-4.341991NY

20.321992WashingtonNFC4.171993DallasNFC13.721994DallasNFC2.141995San FranciscoNFC33.451996DallasNFC26.011997Green BayNFC22.641998DenverAFC16.101999DenverAFC25.222000St. Louis RamsNFC- 6.182001Balt. RavensAFC*-7.102002New EnglandAFC-16.762003Tampa BayNFC25.322004New EnglandAFC3.152005New EnglandAFC-0.61* Teams that are AFC but were originally NFLSources: Dow Jones, National Footbal League