Mean Reversion - The Sports Illustrated Jinx

Mean Reversion - The Sports Illustrated Jinx

The Sports Illustrated jinx states that if a professional athlete makes the cover of Sports Illustrated; his or her performance has now been jinxed and will slip the following season. There is a long (and quite convincing) history of this phe­nomenon ever since Sports Illustrated was first published. In fact, in January 2002, nobody would even pose for the cover and it hit the newsstands with a picture of a black cat and the caption “The Cover that No One Would Pose for: Is the SI Jinx for Real”?

But let’s take a look at this “jinx” from a mean reversion standpoint. In 1998 baseball superstar Mark McGwire set an all-time record when he hit 70 homeruns. This is a remarkable feat that had never been done before in history - that is the reason he made the cover. The next season we should not expect him to outperform that record but, instead, fall back toward his long-term homerun average. He did, in fact, hit 65, 32, and 29 homeruns in the following three years. This is simply mean reversion at work and not an apparent jinx, as many believe. People who believe in the Sports Illustrated jinx are simply con­fusing cause and effect. McGwire’s homeruns did not fall because he made the cover of Sports Illustrated. Instead, he made the cover because the number of homeruns was abnormally high and we should have expected his subsequent homeruns to fall.

If you look back at Figure 7, you’ll see that the VIX tends to bounce back and forth between 20% and 40% most of the time suggesting that the long­-term average may be around 30%. When it moves significantly above or below 30%, it is a rare feat and we should expect it to fall back toward the 30% mark rather than continue in one direction or the other.