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What You Need To Know About The "World Cup Indicator"
That’s what you need to know about the “World Cup Indicator.”
Well, almost nothing.
Over the next month you’ll see a few “What the World Cup means for stocks” type articles.
They get clicks.
And they feed into a costly bias that all investors have.
It’s called apophenia.
Apophenia is where people see patterns and correlations of causation in otherwise random events.
It’s why “technical analysis” is often so flawed.
**Note: technical analysis can be useful if enough people follow the same pattern and the indicators become a self-fulfilling prophecy.
The first article I’ve seen covered it detailed how some professors somehow gained funding for Sports Sentiment and Stock Market Returns.
The study covered more than a thousand international soccer matches.
It concluded if a nation’s team lost in the World Cup, its stock market produced below average returns the next day.
I’m sure the data is true.
But the only conclusion to draw is funding of studies like this is why college is so expensive.
The “World Cup Indicator” should be put up there with the Super Bowl Indicator, the Sports Illustrated Swimsuit indicator, and all the others.
There are real indicators like this one from Amazon which preceded the retail earnings collapse.
Otherwise, be wary of the apophenia trap where you want to see order where this is none.
It will usually lead you down a costly path.
And just enjoy the World Cup for the fun parts…
The miraculous injury recoveries…
The crowd close-ups (will they still be doing those in 2022?).
And, as the Simpsons summed up international soccer in the 1990s…
It’s all here…