Thursday, February 2, 2012

2012 Super Bowl XLVI (46) Prop Bet: The Dow Jones Impact

Leading up to the 2012 Super Bowl XLVI (46) between the New York Giants and New England Patriots, we'll be taking a look at Super Bowl proposition betting, or more specifically, the fun or cray Super Bowl 46 (XLVI) prop bets that you hear so much about. That includes props on the Super Bowl coin toss, Super Bowl halftime show (Madonna), the Super Bowl National Anthem (Kelly Clarkson), the Super Bowl Gatorade Shower dump and much more. Follow along on the Super Bowl sidebar to the right and follow us on twitter @stocklemonblog!

While the Super Bowl is the most bet on single-game event of the year, millions of people bet--legally--on the performance of stocks every single day.

It takes place on Wall Street rather than Las Vegas, and is literally the exact same thing as betting on sports, only its the performance of companies that these degenerates bet on, rather than sports teams.

Hell, that's why we began our life on the internet as the "main squeeze on stocks and sports wagers," because they are so closely knit. We want to make money and are willing to take calculated risks to do so, hence our namesake here at Stock Lemon. And while we've written on stocks before, this 2012 Super Bowl XLVI (46) prop bet merges the stock market and sporting world even better than we do here at our humble blogging abode.

What will happen with the Dow Jones the day after the Super Bowl?
Market Up -140
Market Down EVEN

Before we get into what we think will happen this year on Monday, February 6, 2012, otherwise known as The Day After, let's take a moment to reflect on why this prop has gained so much steam over the years, apart from the simple fact that there is a prop bet for everything these days.

The Super Bowl and stocks really began their bond in the late 70s, when a satirical piece about the correlation between the results of sporting events and the succeeding actions of the stock market was published in the New York Times. It was meant as a joke, and it was, but there was, inexplicably, enough truth to it that people started believing in it, even taking it as fact. And thus, the Super Bowl Indicator, or SBI, was born.

The SBI states that if a team from the historic National Football League (such as the New York Giants) wins the Super Bowl, the stock market will have a positive year. If, however, an original American Football League team (such as the New England Patriots) wins it all, the stock market will have a negative year.

When retroactively applied to each of the 45 previous Super Bowls, the Super Bowl Indicator has predicted Wall Street's success and failure 80 percent of the time. Though, upon further inspection, the results are not so cut and dry. From an article in the Wall Street Journal last year:

Ed Dyl, a finance professor at the University of Arizona, found in 1989 that the stock market went up 2.9% in the four weeks after the Super Bowl when an original NFL team won – versus a (4.6%) loss when an original AFL team prevailed. (This covers the post-1978 period, after Koppett introduced the SBI.)

Dyl pointed out that these results might occur not because investors are idiotic enough to believe in the SBI – but merely because they think other people might be idiotic enough to believe in it.

When I asked him to update his results this week, Dyl found that “the anomaly seems to still be there, but weaker.” Factoring in all the games through last year’s Super Bowl XLIV, over the month following the big game, the market has gained about 1.1% on NFL victories and lost about (-0.1%) on AFL wins.

Whether or not there is something to this legend (which Snopes definitely says there is not), there could be truth to the fact that if people think the market historically goes up, they will want a piece of it themselves, causing it to, in fact, go up.

Some members of the Green Bay Packers rang the closing bell on Wall Street about a week and a half after the team's Super Bowl victory over the Steelers, celebrating the fact that the Dow Jones went up on the Monday following 2011 Super Bowl XLV (45), just as it had done after the 2010 Super Bowl XLIV (44).

But that is certainly no guarantee. Remember, the Super Bowl Indicator measures the impact of the Dow on an annual basis, not just the day after the Super Bowl. However, because many have heard of the Super Bowl Indicator but are not necessarily familiar with what the SBI is said to prove, public prop bettors could be misled into thinking that this prop bet represents this crazy theory.

If that's the case, the question becomes as simple as who you're picking to win the game. If it's the Patriots, the SBI says to take the Dow Jones going down (EVEN), but if the Giants win, take the Dow to go up (-140).

As we'll officially disclose later this week, we like the Patriots, but we also link to further debunk statistical oddities taken as fact, and bet against the AFL club following many of its Super Bowl winning predecessors in negatively impacting the Dow Jones. And so, we're going with the Dow Jones to go up on the Monday following the Super Bowl, just as it has in the past two years.

One day, when the Monday after the Super Bowl is finally declared a national holiday, this prop bet won't exist and we'll all have a good laugh at the silliness of the thing.

And then we'll bet whether or not the Dow will go up on Tuesday.