Super Bowl Indicator of Performance

Performance measures are often proxy variables. That is, they are not necessarily themselves of any great interest but they can tell us a lot about a particular thing or outcome. To varying degrees, performance measures are such proxies -- removed and highly simplified version of the outcome of interest.

We use proxy measures in order to make it possible to measure things easily, routinely and at a reasonable cost. The value of a proxy measure is that it is expected to correlate with the desired outcome. Not perfectly, but good enough.

In other words, while some performance indicators may or may not jibe with our common understanding or mental images of the concept or construct under consideration, they indicate its meaning. Cholesterol level is not health. Tree ring widths and ice core layering are not temperature records. Case clearance is not exactly court productivity or efficiency. Recidivism is not community well being.

And – here it goes -- a win by the Patriots over the Giants in the Super Bowl tomorrow is not a downturn in the stock market.

Some effective indicators are so far removed from our understanding of the thing itself, so lacking in face validity, that it’s quirky. That’s how last Tuesday’s Wall Street Journal referred to one of the most accurate indicators of the future direction of the Dow Jones Industrial Average – just plain “quirky.”

William Powers, who wrote the piece in the WSJ, along with Robert Stoval of WSJ Research (who I can only assume is one of the “stat guys” so beloved by us sports fans), remind us that its time for the Super Bowl Predictor of stocks this year. This indicator has called the right direction of the Dow Industrial average following the Super Bowl an astonishing 81% of the time -- 33 out of a total 41 years.

Nitpicks aside – few measures are ever immune to nitpicking – the Super Bowl Predictor says the market rises when an “original” NFL team like the Giants wins, and declines with a win by one of the AFL teams like the New England Patriots. Sorry New England Patriot fans, we like you, we really do, but we simply can’t afford to have the Pats win over the Giants this Sunday. Money is money after all.

So, while you’re watching the Super Bowl tomorrow, think about what it all means. I know it will be hard for us to wrap our minds around the lesson of this post, but remember it’s not just a Game, it’s a proxy for good or bad times ahead.

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