Super Bowl Predicts An Up Year for the Stock Market

As you are probably aware by now, the Tampa Bay Buccaneers won the Super Bowl on Sunday. The National Football League has two conferences – the National Football Conference (NFC) and the American Football Conference (AFC). The Super Bowl is the clash between the NFC and AFC champions. Prior to 1970 there were two rival professional football leagues, the NFL and the American Football League. There were 16 NFL teams and 10 AFL teams. In the 1970 merger, the old AFL teams became part of the AFC, and most of the old NFL teams were assigned to the NFC. However, for the sake of balance, 3 teams – the Cleveland Browns, Pittsburgh Steelers, and Baltimore (now Indianapolis) Colts – were moved to the AFC so that each conference would have 13 teams.

In 1978 New York Times sportswriter Leonard Koppett noticed that any time either an NFC team or one of the pre-merger NFL teams (Browns, Steelers, Colts) won the Super Bowl, the stock market would have an up year and any time an AFC team won (that was not either the Browns, Steelers, or Colts), the stock market would have a down or flat year.

Koppett’s observation was tongue-in-cheek, but the idea that the Super Bowl (which used to take place in January and now occurs in early February) could predict the stock market’s performance for that year became widely known. The overall track record is that the indicator has been right 40 of 54 times, which is 74%. However, we should not count the track record for the first 11 years, which was the basis for the claim. Excluding these, the Super Bowl Indicator’s track record is a more mundane 67%. And over the last 21 years, the indicator’s track record is less than 50% – it has been right 9 years and wrong 12 years.

A common statement in statistics is that “causation is not correlation.” A widely cited example is that there is a strong positive correlation between shark attacks and ice cream sales at the beach. Neither one causes the other, but there is an underlying cause for both – warm weather. As the temperature rises in the Spring and Summer, more people visit beaches leading to both more ice cream sales there as well as more shark attacks. With the Super Bowl Indicator, there is no underlying joint cause for which conference wins a Super Bowl and the stock market’s performance that year. It is an example of spurious correlation, which two variables that happen to be positively correlated with one another for no reason.

Another spurious correlation related to football is the Redskins Rule. Since the team formerly known as the Redskins relocated from Boston to Washington, D.C. in 1937, the performance of the Washington team in their last home game correctly predicted the result of every Presidential election between 1940 and 2000. The rule states “If the Redskins win their last home game before the election, the party that won the previous (Presidential) election wins the next election and that if the Redskins lose, the challenging party’s candidate wins.” In 2004, however, the Redskins lost their last home game, but the incumbent party won election to the White House. In 2020, the Redskins (now called the Washington Football Club) won their last home game, against the Dallas Cowboys 25-3, but the incumbent party did not win the election last year either.