Super Bowl: How football can influence investment strategy

Ed Reed of the Baltimore Ravens (left) and Anthony Dixon of the San Francisco 49ers The Baltimore Ravens and the San Francisco 49ers will contest the showpiece

Forget the European debt crisis, America's fiscal wrangling, and Apple's recent stumbles - no matter what happens in 2013, the stock market is going up.

That's because the San Francisco 49ers are set to square off against the Baltimore Ravens this Sunday during the Super Bowl, of course.

"It's a win-win situation," says Robert Stovall of Wood Asset Management.

The Super Bowl Stock Market Indicator holds that if a team from the original National Football League wins - as opposed to a team from the younger American Football League - the stock market will go up that year.

This year, both teams are from the original NFL.*

"The record clearly states that the Super Bowl predictor has been right around 80% of the time," says Mr Stovall.

"It's a better performance record than any gaggle of gurus or platoon of portfolio managers."

'I'd be a rich man'

Correlation, of course, does not equal causation - and, so far at least, there is no reason to suggest that American football causes investors to feel suddenly more bullish in a given year.

Yet the Super Bowl Stock Market Indicator - and a variety of other investment strategies - have nonetheless sprung up around the country's most popular sporting event, which is expected to be watched by more than 173 million Americans.

Super Bowl banner This year marks the 10th time the Super Bowl will be played in New Orleans

Prof George Kester, of Washington and Lee University, estimates that if since 1967 (the first year the Super Bowl was played) he'd invested $1,000 in the stock market each year the indicator predicted an up market, and switched the money over to bonds every year that the indicator predicted a down market, he would have $168,053 today.

Start Quote

The biggest story - as it is every year - is the remarkable revenue the week-long Super Bowl celebration brings in”

End Quote Rick Horrow US sports business expert

If he had just left his money in the S&P 500? He'd have a paltry $63,874.

"I can really confidently say today that had I abandoned all reason and invested in the Super Bowl, I'd be a lot richer man," says Prof Kester.

And he isn't the only one who could have been getting rich, theoretically.

According to forthcoming research by Prof Kester and his colleague Prof Scott Hoover, this result would have beat almost every mutual fund in the country that has been around since 1967.

This includes some big names, like the Washington Mutual Investors Fund and Price (T. Rowe) New Horizons Fund.

"A mutual fund manager could have simplified his or her life just by watching the Super Bowl on Sunday," says Prof Kester.

More than the market

For those who have decided to throw caution - and the rules of statistics - to the wind, there are a few other investment strategies.

It is estimated that CBS, the network showing the game this year, will be able to charge more than $3m for each 30-second advertisement that airs around the game.

Big companies hope that the ads will appeal to consumers and ultimately help their bottom line.

San Francisco 49ers head coach Jim Harbaugh (left) and Baltimore Ravens head coach John Harbaugh Jim (left) and John Harbaugh are the first brothers to coach opposing NFL teams

BlackBerry, formerly Research in Motion, has already announced plans to place its first ever Super Bowl ad in an attempt to revive the company's ailing fortunes.

For investors who might doubt the smartphone maker's overall strategy, investing in the stock short-term near the big day might make sense.

According to one recent study, the stock of a company that places an ad in the Super Bowl - particularly a company which places an ad in the second quarter - will see positive results in the two to four days before and after the event.

Furthermore, companies whose headquarters are located in either the city that the Super Bowl is played in - this year, New Orleans - or in the city of the winning team, tend to see a small boost over the year.

That doesn't help BlackBerry, which is headquartered in Canada.

Betting game

No-one, however, would advise an investment strategy based solely on the Super Bowl. And for many Americans, stocks aren't the real place money gets put on the game.

Most popular Super Bowl XLVII bets

  • The San Francisco 49ers are favoured to win by 3.5 points over the Baltimore Ravens
  • The estimated points total for the game is 47 points
  • The coaches of the two teams are brothers. The bet for how long they'll hug/shake hands after the game? 7.5 seconds
  • How many times will the coaches' dad be shown during the game? 2.5 times
  • How long will it take Alicia Keys to sing the national anthem? 2 min 15 seconds
  • Will Jay-Z join Beyonce on stage during the halftime show? 50/50 odds

Source: RJ Bell, Pregame.com

More than 50% of adult Americans will have a bet on the game, according to RJ Bell, of Pregame.com, and only 1% will do so legally.

Globally, more than $10 billion will be wagered.

"For many people this is the only bet they make of the year," says Mr Bell.

Jay Rood oversees the process for setting the odds of 12 MGM casinos in Nevada, including the famous Bellagio Race & Sports Book.

"The game is very financially crucial to our operations," he says.

"It's the springboard for the year. If things fall just perfect for us, it could represent 15% [of profits]."

His pitch to get someone to put down some money?

"Supplement your retirement account that's been losing money in the stock market."

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*There are different ways of analyzing team affiliation. Some, like Mr Stovall, count teams like the Baltimore Ravens as original NFL teams, even though technically the team is an "expansion" team - created after the NFL merged with the AFL. Others, like Prof Kester, say that in a case such as this, the result is dependent only on whether or not the original NFL team (in this case, the San Francisco 49ers) wins or loses.

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