Should investors root for the American League (Tampa Bay Rays) or National League (Los Angeles Dodgers) to win?
Is there actually a difference in stock market performance depending on who wins the World Series?
Should you really change your investment plans based on an American League or National League victory?
Of course not. But let’s explore anyway.
The World Series
The inaugural World Series took place in 1903, with the Pittsburgh Pirates, National League champions, competing against the Boston Pilgrims (now Red Sox), American League champions.
Boston won that first World Series and through 2019, there have been 115, occurring every year, except 1904 and 1994.
The American League has outpaced the National League in these contests, 66-49. The New York Yankees have taken the lion’s share of AL victories, with 27. The St. Louis Cardinals, of the NL, are second in World Series victories with 11. The Oakland A’s have 9 as do the Boston Red Sox and the San Francisco Giants have won eight.
The the Los Angeles Dodgers won the 2020 World Series, earning their seventh title.
The Stock Market
Oddly enough, a pattern has sort of emerged. An academic study compared the performance of the Dow Jones Industrial Average in years following victories by AL or NL teams, for every World Series.
This study used the geometric average of gains, a more advanced method of averaging. It’s important to note that the DJIA is a price-weighted index that only tracks 30 large US companies. It is not necessarily a fair representation of the entire stock market.
In the 49 years following a National League victory, the DJIA increased an average of about 8.4%.
It increased only about 2.5% in the 66 years following an American League victory.
Consider the last 3 years:
Happy investors will remember that for the calendar year 2017, the DJIA raced forward by 25% following the 2016 National League Chicago Cubs’ first World Series victory since 1908. I think everyone was excited to see the Cubs’ finally win again.
Unhappy investors will remember that for the calendar year 2018, the DJIA dropped 6% following the 2017 American League Houston Astros World Series victory. Baseball fans will also remember the cheating scandal which emerged shortly thereafter, calling into question if the Astros should be stripped of their first-ever World Series title.
Happy investors will remember that for the calendar year 2019, the DJIA jumped over 23%, following the 2018 American League Boston Red Sox victory.
Is that reason enough to root for the National League and Los Angeles Dodgers to win the 2020 World Series? Maybe not, but I’m a Dodgers fan either way.
Consider the World Series history from 1935-2008, where another analysis found distinctions in performance in the fourth quarter of the same year of the Series in question:
After a National League victory, the S&P 500 gained an average of about 4.2% in the fourth quarter.
An American League victory led to an overall return of about 2.8% in the fourth quarter.
Accountants & Baseball
In another study in the Journal of Accounting and Finance, five researchers also took on the question of whether the results of the World Series affected the stock market. The researchers examined the S&P 500 results for 1951-2011, excluding 1994 (no Series in 1994).
The AL won 34 of the 60 World Series preceding these years, while the NL won 27.
The S&P 500 rose, on average, about 15% after a National League victory and only about 11% when an American League team won.
Based on their statistical analysis, however, the authors concluded that there was no actual correlation between the victors and the market. Warning investors not to rely on the World Series, they caution that “such anomalous investment strategies are detrimental to creating wealth.”
We certainly agree. But considering how a resurgence in COVID-19 and the upcoming election are weighing on markets, it sure would be nice if the win for the NL Los Angeles Dodgers could also be a win for investors.
I wouldn’t bank on it, but it’s still interesting to consider the coincidental relationship, right? Go Dodgers!
How About Specific Baseball Teams
In the years after the New York Yankees won the World Series, the DJIA grew 8.3%, on average. However, the DJIA rises 12.9% after the Yankees lose the World Series (13 times). So, the market seems to prefer losses by the Bronx Bombers over wins.
Their National League, cross-city rivals have fared even worse, however. The New York Mets have only won the World Series twice, in 1969 and 1986. In 1970, the DJIA rose a mediocre 4.8%. And the Mets 1986 victory preceded the stock market crash of 1987, which saw the market plummet by 23%. Sorry Mets fans.
Compare this to the Chicago Cubs, a three-time World Series winner (1907, 1908 and 2016), whose victories preceded DJIA growth of 46.6%, 15.0% and 25.0% for 1908, 1909 and 2017, respectively.
Following the 11 World Series victories of the St. Louis Cardinals, the DJIA rose 12.4% and the Giants’ first seven victories led to a rise of 10.5%.
In the eight years following Red Sox titles, unfortunately, the DJIA grew only 1.1%. This includes large gains after their 1903 and 1918 wins, but also a big loss after their 2007 victory. The 2018 Red Sox victory – the ninth for the Red Sox – reversed this trend as the DJIA jumped 23% in 2019.
No World Series
The World Series has been cancelled on two occasions.
In 1904, the NL champion New York (now San Francisco) Giants refused to play the AL champions and then a prolonged players’ strike prevented the 1994 World Series.
In 1905 and 1995, the DJIA shot up by 38.2% and 33.5%, respectively. That’s an average of 35.9%!
Thus, the DJIA grows dramatically after seasons where there is no World Series. That’s bad news for baseball fans.
As these analyses show, the market has surprisingly done better in years after the National League wins the World Series, so the Dodgers’ big win could bode well for Investors and LA Dodger fans alike. In addition, it appears that:
- The market does especially well after there is no World Series
- The DJIA increases more in years after the Yankees lose the Series than in years they win
- When the Cubs, Cardinals, or Giants win, the DJIA shoots up in the following year
- After Red Sox, Mets, or Pirates victories, the market grows, but not very much
There is, of course, no correlation between the World Series victor and the stock market. Even if there were a correlation, only the Yankees have enough victories (27) to form a statistically significant number for study, and so far those numbers don’t look good for Yankees fans.
People like to look for patterns in random data, it makes life more interesting. While it may be fun to look at these unique statistics that have nothing to do with investing, the key to successful long-term investing, lies elsewhere.