March Madness is one of the biggest events in the sports industry and in the NCAA College Division. If you don’t know what that is, The NCAA Division I Men’s Basketball Tournament, also known and branded as NCAA March Madness, is a single-elimination tournament played each spring in the United States. Every year’s fans draw up their March Madness brackets hoping to predict every win and loss correctly, but rarely does anyone predict correctly. For the past few years, the game has been either canceled or held in a bubble due to COVID. At last, in 2022, the game will return as per usual, with big names like Duke and Kentucky going at it. The last time the tournament was held in its full glory was in 2019, drawing an average of 10.5 million viewers tuned in to the tournament. Whether or not the numbers will return to this level are hard to say, especially with the 2021 game a few 14.9 million people. For those invested in media companies, this could be an important metric, with Executives from Paramount Global and WarnerMedia promoting March Madness, which promises to pay out nearly $1 billion in advertising revenue on the men’s side.
Looking at the event in the context of the market and investments, some believe in an interesting market trend in which the Market performs worse during March Madness. So how could this be? Well, some believe that March Madness is an investor distraction. As an annually recurring event that draws a massive amount of attention, at least in part, during trading hours, it could also be a distraction. There indeed appears to be some level of data to back this, although not enough or quality data to say anything for sure. Specifically, a study by Stanford University compared market activity on the Thursdays and Fridays of NCAA tournament opening rounds (from 2000-2012) to Thursdays and Fridays outside of the tourney. The study found that “a critical mass of investors becomes distracted enough to make the overall market react more slowly to earnings announcements, with more drift in prices in the direction of the earnings signal”. What do you think about this trend? Does it make sense to you? Or is it just nonsense?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.