Can the World Series Winner Predict the Stock Market?

Baseball's regular season has ended and the postseason has begun, and frankly I'm spending more time listening to the games on the radio than planning these blogs, so I thought it might be fun to look at the question of whether the World Series winner can be used to predict stock market performance.

When I was growing up, the World Series was the number one sporting event in the USA.  In the last 20 years or so, the Lords of Baseball have allowed it to fall to number three behind the Super Bowl and the NCAA basketball tournament by permitting the TV networks to dictate that the games end when the only people awake in the eastern time zone are criminals and perverts, but that's another story.  I still follow the game in my "old age" but it's hard to stay up for all of these games when I have to get up and go to work the next day.  Moreover, with the amount of Major League teams having almost doubled since I started following the game as a child and the increasing frequency with which players move from team to team, it's hard for me to keep track of all the players like I used to.  I always confuse Chase Utley and Dan Uggla, although that may be at least partially attributable to my habit of referring to them, respectively, as "The Good, the Bad, and the Utley" and "The Good, the Bad, and the Uggla," as well as Casey Blake and Blake DeWitt, but fortunately I'm not at the point in my senility where I confuse the latter two with Sean Casey or Joyce DeWitt.

The first World Series was played in 1903, when the team then known as the Boston Pilgrims defeated the Pittsburgh Pirates.  The World Series has been played in every year since, with the exception of 1904, when the legendary John McGraw refused to let his New York Giants play against a team from the "inferior" American League, and 1994, when the remainder of the season was canceled by a players' strike.  I gathered data on who the World Series winners were and how the so-called S&P 500 performed for every year that the Series was played, excluding 1919, the year of the infamous "Black Sox" Series that we all now know wasn't quite on the level.

Looking at the all-time results was inconclusive.  Excluding 1919, there have been 103 World Series played as of this writing.  The American League (AL) has won 61 of these.  The S&P 500 rose in 44 of those years, or 72%.  The National League (NL) has won the World Series 42 times.  In 28 of those years, or two thirds, the S&P 500 increased.

So I decided to look at this several other ways.  One way was to eliminate from consideration the periods of Yankee dominance, i.e., 1936-62 and 1996-2000, because, after all, nothing was going to stop the Yankees in those years, not even the fibulations of the fickle stock market.  I know what you're thinking---wasn't the period before 1936, when the Yankees employed a certain Babe Ruth, also a period of Yankees dominance?  Actually, before 1936, the Yankees won exactly four World Series---not bad, but one less than the Philadelphia Athletics, for instance.  At any rate, excluding these periods is even more inconclusive.  This sample would include 71 World Series, of which 39 were won by the AL & 32 by the NL.  The S&P 500 went up in 69% of the years that the AL won, and also in 69% of the years that the NL was victorious.

Next I decided to look at recent trends.  After all, financial analysts are into trends, right?  Since 1980, the AL has won 16 of the 28 World Series played.  In those years, the S&P 500 increased 14 times, a whopping 88%.  During the 12 years that the NL has won, the S&P 500 went up 8 times, or two thirds of the time, a significant difference in favor of the AL.  It gets even more lopsided in favor of the AL when we examine the trend since 1990, during which the AL has won 11 of the 18 World Series played.  The S&P 500 rose in nine of those years, or 82% of the time, and in only four of the seven years that the NL won, or 57% of the time.  Thus, the recent trend shows that the S&P 500 is much more likely to rise when the AL representative wins the World Series.

There.  I knew that if I persisted I could make a blog out of this.