Financial Services

Looking for a Solid Super Bowl Bet? Try Investing

YOUNGSTOWN, Ohio – If the Cleveland Browns ever make it to a Super Bowl, Ohio companies will have a reason to celebrate beyond the team making their first appearance on football’s biggest stage.

In a study published last year, researchers found that companies with headquarters in the states of teams taking part in the NFL championship see “a significant upward return drift” on their stock prices between the conference championship games and the Super Bowl.

“[It is] a pattern consistent with investors trading in anticipation of the game itself. The ‘anticipatory behavior’ among investors leads to widespread pregame returns, which is not documented in prior studies,” wrote Geoffry Friesen of the University of Nebraska, Brian Payne of the Air Force Academy and Jiri Tresl of Central Michigan University. “These pre-event abnormal returns are positive and statistically and economically significant for all firms, and the size of pre-event returns varies according to each team’s favored status.”

Further, they found that teams “geographically associated” – again, sharing a state with the team – with the Super Bowl winners see an uptick in stock prices in the 10 days following the game, while companies associated with losing teams see “moderate downward drift.”

For favored teams that won, the researchers found significant positive returns for associated companies, while those connected to favored teams that lost saw drops. Meanwhile, teams that were not favored saw “neutral or negative” post-game returns regardless of the outcome.

“The hypotheses in our article are motivated by three connected empirical findings,” Friesen, Payne and Tresl wrote. “That sporting events affect mood, that mood affects investor behavior, and that investor behavior can affect stock prices. We are particularly interested in the interplay between mood and the ‘anticipation’ of a future event.”

“Sentiment and Stock Returns: Anticipating a Major Sporting Event” was published in the Journal of Sports Economics. The study examined individual companies’ stock returns around the time of Super Bowls from 1967 – Super Bowl I – and 2010.

“Our findings are strongest among the smallest quintile of firms and are robust to various risk adjustments and using a matched sample control group,” they continued. “The collective findings suggest that only by standing on the sideline will investors avoid winning around the Super Bowl.”

Overall, they found tying an investment strategy to the Super Bowl has historically been profitable.

“The data suggest a viable trading strategy around the Super Bowl involving a zero net investment portfolio consisting of a long position in all firms headquartered in competing teams’ states and a short position in the S&P 500,” the authors wrote. “Such a strategy has yielded an average return of 3.01% across the 19 trading-day window and has been profitable in 33 of the 42 years.”

Pictured: A Philadelphia Eagles fan celebrates his team winning Super Bowl LII (Wikimedia Commons/Lorie Shaull).

Published by The Business Journal, Youngstown, Ohio.