December 26, 2002

Three consecutive years of stock market decline are a rare experience in the U.S. Going back to 1926 we could only find four episodes during which the stock market declined three years in a row: 1929-31, 1930-32, 1939-41 and 2000-2002. The first two periods overlap two years. Thus whether one counts them as separates episodes or not could be a matter for debate. Since economists are fond of trying to identify patterns, we decided to look for some empirical regularity in the data. A popular approach used by many markets participants is to correlate the stock market with the winner of the Super Bowl. Unfortunately the history of the Super Bowl is less than four decades old. So we decided to look at the next best longer running sports championships, the World Series.

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