Pick 55 - Spurious Correlations

This Sunday the two best teams in the National Football League  face off in New Orleans for Super Bowl XLVII. In addition to bragging rights for the winner, there may be some hidden value in the outcome.  Back in the late 1960's a group of geeky data analysts started tracking the correlation between the winner of the Super Bowl and the fate of the Stock Market for the rest of the year. (I told you they were a bit geeky) Perhaps after one too many beers they predicted that the outcome of the Super Bowl could forecast  what was going to happen to the U.S. stock market over the next 12 months. So they began accumulating the data each year thereafter and, by golly, there was a clear correlation.

The so-called  Super Bowl Stock Market Predictor claims that if an original NFC team wins the prize, the stock market will end the year up, but if an original AFC team wins, the market will end the year down. 

This seems like a ridiculous correlation, but from 1967 to 1988 the indicator was right 90.9 percent of the time - 20 out of those 22 years. Since then the accuracy has decreased, but it still hovers at around 76.7 percent - a predictor. When was the last time the advice from your Broker hit the mark 8 out of 10 times? 

In geek terms this is called a spurious correlation because the rationale for the correlation is totally off the wall.  Yet its track record is as solid as the gold in Fort Knox. Maybe more so because few, if any, investors have seen the gold in Fort Knox. Many who have followed this Predictor have seen their portfolio turn to gold in a couple of years.

The Super Bowl Stock Market Predictor is not the only spurious correlation with hidden value. Has anyone noticed that when the DJIA goes positive on a Friday, the price of gas usually increases a few cents on Monday. The opposite is also true. Use this hidden value to decide whether to fill er up on Friday or Monday and you will be ahead of the game most of the time.

$tokens to Tip the Pickers

1 $token - 1.00 USD3 $tokens - 3.00 USD5 $tokens - 5 USD 12345