Tuesday, February 8, 2011

The stock market and the super bowl

My colleague, Craig Newmark, just posted a link to a report on an article that claims that there is a link between whether a firm advertises in the Super Bowl and that firm's stock performance immediately after the game.   The authors claim a significant positive relation.

Like Craig, I don't buy it.  I'd like to have a good look at the paper, but the authors don't appear to have it posted in any of the usual places - for example on their websites.  So it is hard to look at their method.  My guess is that the effects are due to mis-measurement, failing to correct for risk and other known factors that affect stock returns, oh and of course luck.  The results would imply a very simple trading rule, which I just don't buy.

There are, however, some cases where a link between sports advertising and stock performance has been found.  For example,  there is the NASCAR effect - where the winning car's sponsor gets a small stock price boost. This effect makes a bit more sense because brands are tied more directly to the outcome of the race, and NASCAR fans are very loyal.  So there may be a real spike in sales of soap powder after a win.