Does a Patriots victory 'bear' bad news for the market?

2012-02-05T00:00:00Z Does a Patriots victory 'bear' bad news for the market?By Simone Del Rosario Medill News Service nwitimes.com
February 05, 2012 12:00 am  • 

Las Vegas odds makers are expecting a win by the New England Patriots in today's Super Bowl game, but people on Wall Street may be better off rooting for the Giants – and it's not because they're in New York.

There's a Super Bowl indicator that suggests a win by a National Football Conference or pre–merger National Football League team means stock prices will rise for the calendar year. That's called a bull market. However, if an American Football Conference team wins, stock prices are likely to drop, resulting in a bear market.

The theory is largely born out by the stock market's performance: In 36 of the 45 past Super Bowls, the stock market has headed in the direction the indicator predicted 80 percent of the time, according to an analysis by Medill Reports.

Of course, the casual correlation doesn't imply causation. Some financial experts are highly dubious of the tendency.

"I don't follow it. I know many people that do, but I'm skeptical: I'm not aware of any true correlation," said William Hummer, chief economist at Wayne Hummer Investments in Chicago.

Still, the theory has seemed to work for the Chicago Bears.

After the 1985 Bears won the big game in 1986, the Dow Jones industrial average jumped 23 percent for the year.

The Monsters of the Midway didn't make it to the Super Bowl again until 2007 when they fell short in a 29-17 loss to the Indianapolis Colts. That would normally presage a bear market, but the victorious Colts are an old NFL team. The market climbed 6 percent.

It was a win–win matchup for the market even if Chicagoans didn't feel the same way.

The indicator failed to correlate with market trends more often than normal in the 1990s and early 2000s. However, since 2005 the only outlying year was 2008, which has a remarkable resemblance to Sunday's championship game: Patriots versus Giants.

In 2008, the Giants defeated the Patriots 17-14. Even with a NFC win, though, the market didn't stand a chance against skyrocketing gas prices, a bust in the real estate bubble and overall economic chaos: The Dow dropped 39 percent, down nearly 4,500 points for the year.

So what will happen in this Sunday's rematch? Does a Patriots' victory "bear" bad news for the market?

"The Super Bowl indicator is pure chance – there's no underlying economic reason," said Alex Edmans, assistant professor of finance at the Wharton School at University of Pennsylvania. "To expect there's going to be an effect going forward is very unlikely."

Edmans, a Patriots fan, received his doctorate at Massachusetts Institute of Technology, while celebrating two Patriots' Super Bowl victories. He also wrote a paper on the relationship between soccer and the stock market.

"When you get knocked out of a World Cup, the country's market goes down: it affects the national mood," he stated. "Whether an AFC or NFC team wins doesn't affect national mood.

"After Sunday, Patriots fans will be happy or Giants fans will be happy. But there's no effect on the overall American economy," Edmans said.

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