February 7, 2010
Super Sunday is here. In the interests of public service, we here at the IJSF blog want to warn you about the dangers of the Super Bowl Stock Market “Predictor.” George Kester, a finance professor at Washington and Lee University has recently updated the results of this “predictor” for the first time since the Journal of Finance inexplicably decided to squander 6 valuable pages of journal space on this drivel in 1990. In his defense, Professor Kester points out the spurious nature of this statistical artifact.
Here’s how it works: the conference affiliation of the Super Bowl winner is alleged to predict stock market performance for the upcoming year. If the winning team was affiliated with the original National Football League, the market will go up over the next year; if the winning team was affiliated with the old American Football Conference, the market will go down. Here’s the test and results:
Kester constructed a back-test with a beginning portfolio of $1,000 that he invested in S&P 500 stocks or Treasury bills, depending upon which team won the Super Bowl.
“Interestingly, over the entire history of the Super Bowl, my wealth would have been more than twice as great had I used this strategy rather than a passive buy-and-hold strategy with the S&P 500,” he said. “I took brokerage costs into account whenever I sold T-bills and invested in stocks and vice versa, and I also included dividends on the S&P stocks. The dollar values of the portfolios at the end of 2008 would have been $43,000 for a buy-and-hold strategy and $105,000 for the Super Bowl market-timing strategy.”
Of course the original predictor can’t be applied to today’s game because the Saints are not an original AFL franchise, but why let facts get in the way of a good story? I posit that one could select any event with a binary outcome observed annually and claim this “predicted” market outcomes in some way (my choice would be Punxsutawney Phil). An ex post analysis like this would have a good chance of finding some positive correlation.
I’m not adjusting my portfolio in the morning. I’ve already shorted the S&P 500. Phil told me to last week.
February 7, 2010
So there have been any number of articles in the news about the Bird’s Nest stadium which hosted the opening and closing ceremonies of the 2008 summer Olympics in Beijing. Unable to get a local football club to sign a deal, the stadium has gone virtually unused and empty since the end of the 2008 games. Currently the stadium is hosting a winter snow amusement park for the winter season, and charging tourists $7 to enter the stadium and go into the souvenir shop. The China Daily has reported recently, that there are talks being held about building a luxury hotel INSIDE of the Bird’s Nest. That’s right, the seats from the North Side of the stadium will possibly be removed if the deal goes through, and replaced with around 80 hotel suites. The stadium is also pushing forward to try and bring in other commercial shops and top class restaurants to try and bring more business to the stadium.
The Bird’s Nest, however, will still continue to remain a stadium, with two high profile games set for later this year. On the anniversary of the Olympics, Real Madrid is set to take on a local Chinese soccer club. In September, Argentina and Portugal are slated to play in a friendly. It’ll be curious to see if they can start bringing more business to the stadium.
Another “great” Olympic venue from Beijing 2008 was the Water Cube, the Olympic Swimming Center where Michael Phelps raced his way into the record books. Like the Bird’s Nest, the Water Cube was having trouble finding events to host. I believe the Water Cube has held an indoor light show with concert, and a Russian performance of Swan Lake. It was recently announced that the Water Cube will be remodeled into a water amusement park. The Chinese government spent about $170 million (U.S.) to build the Water Cube, and now they will spend another $33 million or so, just to revamp it into something the public can actually use. This actually doesn’t seem to be too bad of an idea to me, if people actually come to the Water Cube and pay to play in the park.