Mike Moffatt is a chemical industry consultant and a Lecturer in the Business, Economics and Public Policy (BEPP) group at the Richard Ivey School of Business.
Hoping for a strong U.S. economy in 2011? Better root for the Packers this Sunday.
Economic growth and the results from a football game should be uncorrelated, but yet the Super Bowl historically has been a very strong predictor of economic growth. In the 1980s, economists began to notice that when a team from the old American Football League won the Superbowl, it was a bad year for the economy and the stock market.
But if the winning team was from the pre-merger National Football League, then expect a strong year for markets. Krueger and Kennedy (1990) found that this rule of thumb correctly predicted the movement of the Dow Jones Industrial Average 20 years out of 22, for a 91 per cent accuracy rate. An investor using Super Bowl results to make investment decisions would have significantly beat the market from 1967-1988.
I decided to see if this still held true today. I made a couple of changes from Krueger and Kennedy: rather than examining stock market returns, I measured the U.S. growth rate of GDP. As well, I considered whether or not the team represented the AFC or NFC. I decided to use an AFC/NFC split since, due to expansion, many teams in the league were in neither the old AFL or pre-merger NFL. As well in some Super Bowls, such as this one, both teams were from the pre-merger NFL, which would make the result of the game irrelevant.
The relationship still holds. The economy grows at 3.1 per cent when the NFC team wins while only at 2.6 per cent when the AFC team is victorious. The economy had very good years when the NFC's Bears won by a landslide in 1986 and the NFC's Redskins won handily in 1988, so I also examined if the margin of victory made a difference. It turns out that for every five extra points the NFC wins by, the economy grows an extra 0.1 per cent, however this result is not statistically significant.
The model is not quite as strong in predicting years where there is negative economic growth. In four of six years where the economy contracted the AFC team won - only slightly better than random chance. However, the two NFC victories in this year were very close with the 49ers beating the Bengals by five points in 1982 and the Giants beating the Bills by a single point in 1991.
So am I rooting for the NFC's Packers to beat the AFC's Steelers on Sunday? No. Not because I want the economy to do badly, but because I'm a Chicago Bears fan. I want the economy to do well, but rooting for the Packers is too high a price to pay.
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