Super Bowl’s as a predictor of markets
Since the 1980’s there have been studies on the “predictive” powers that the winner of the Super Bowl has on the market’s.
Recently there was a new study conducted by a finance professor in Virginia found that 77% of the time the stock markets performance can be predicted based on the winner of the Super Bowl.
If the team that wins the Super Bowl has its roots in the original National Football League, the market will increase, according to the so-called Super Bowl Stock Market Predictor. If the winning team is originally from the old American Football League, the market declines.
According to that methodology then the markets will be up in 2010 as both teams, the New Orleans Saints and the Indianapolis Colts can both trace their roots back to the original NFL. So go out and bet the farm on stocks, right? Well not so fast, remember in 2008 the New York Giants, an original NFL team, won the Super Bowl (in dramatic fashion!) and stocks proceeded to have one of the worst performances ever.
I think this is more of an interesting side note rather then an out right predictor. Remember in trading having the correct position is only part of the equation. You need to have timing right also. Saying the market is going up, buying into the market then getting squeezed out on a retrace, only to watch it rally (without you participating) again does you no good. The market did what you said but you did not have a position. That is why Paper Trading although useful is not the same as having the actual position.
Quick story, we have a trainee in our office. He knew I was a big fan of quantitative trading and as such designed a trading system. It was based off simple moving averages to give him signals on the markets. I encouraged the development of the system, had him “paper trade” it and back test it. He produced results for it showing solid,steady gains. I told him when he was ready to let me know and I would let him do actual trades, using my limits and my books. January 2010 started and so did the “live” trading of the model. Things did not go exactly as planned, first on three occasions the market hit our entry points but did not go offered or bid at the level and therefore we did not actually enter the position. In all cases it would have resulted in a substatial percentage gain. Second on two occasions we were stopped out “prematurely” only to watch it move dramatically in our favor. Why? Because “it looked like it was going to continue to go against us”. These were very modest positions and the P/L was of no impact. What I was trying to teach the trainee was that there is a big difference between real trading and paper trading. I knew we needed to have a sit down when he came to me one day and cut the position size in half because he wasn’t sure the “model was producing good signals”.
To be fair the markets have changed since the end of 2009. They are more volatile and certainly more nervous. But I think he got the message. Currently he is “retooling” the model and using more accurate entry and exit points (stop losses are not done at the level). No matter whet happens it is a useful exercise for the development of any trader.
Good Luck and Good Forex Trading.
SUPER BOWL PREDICTION
Inndianpolis 31
New Orleans 28
Also Click Here to read the article I referenced about the Super Bowl.
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