Roll-Lin in the Dough:Jeremy Lin, Amare Stoudemire, Carmelo Anthony and the MSG Stock Price

This was post number two as part of the Harvard Sports Analysis Collective’s Linsanity Day. You can read the other posts here,  here, here, or here.

by  Harry Chiel and Ben Blatt

In his meteoric rise over the past two weeks, Jeremy Lin has impressed more than just the President of the United States — he has wowed stock market investors worldwide.

Shares for Madison Square Garden, Inc. trade on the NASDAQ, providing a wonderful data set to measure Jeremy Lin’s popularity and his perceived profitability to his home arena.  Sure enough, as his production on the court has shot up, so has MSG stock, a whopping 8.8% since February 4th, his first start in the NBA.  This dramatic appreciation has not been consistent across the entire equity market; the S&P 500, an index used to measure the value of the stock market, fell by 0.12% over the same time period.  Lin’s rise to stardom certainly could signal a growth in revenues for MSG: merchandise sales, ticket sales, and TV ratings have all grown over the past two weeks, as has the Knicks’ appeal to a range of international audiences.  Apparently, the Harvard Econ major has provided quite a stimulus for his franchise.

In fact, some of the most drastic increases in the stock price can be traced to some of Lin’s breakout performances.  Following his 23-point, 10-assist effort against the Washington Wizards, the MSG stock rose 2.89% the next day, in comparison to the 0.52% rise of the S&P.  After his epic Friday night game against the Lakers, the MSG price grew 1.16%, while the S&P was up only 0.68%.  Although the stock price for MSG had risen substantially in the month before Lin played for the team, there is certainly evidence that suggests that his performance has caused a rise in expectations of the Knicks’ profitability.

If an unheralded, undrafted player can generate such investor confidence within just two weeks of superb play, then certainly the acquisition of superstar players, with several years of high-scoring games, should cause an even more spectacular boost in MSG stock prices, right?

Well, not quite.

On July 5, 2010, the Knicks announced the acquisition of highly desired power forward, Amare Stoudemire.  Stoudemire, an excellent player in his own right, was an important pick-up for the Knicks for another reason–their goal of winning the LeBron James sweepstakes.  In the days after Stoudemire’s signing, investors seemed to have priced in the possibility that James would come to New York, which would have dramatically increased the revenues of the Garden.  When James signed with the Heat, though, MSG’s stock was sold off, back to around the same level as before the Stoudemire acquisition.  Overall, the addition of his skills to the Knicks starting lineup did not have a significant effect on the pricing of MSG stock.

Several months later, on February 21, 2011, the Knicks traded for marquee player Carmelo Anthony of the Denver Nuggets, as well as former NBA Finals champion Chauncey Billups.  Now with two superstars on the squad, and another experienced veteran guard, the Knicks were widely viewed as potential contenders, and the MSG stock price increased slightly relative to the S&P 500.  Still, it is clear that the share price in February 2011 did not increase nearly as drastically as it has over the past two weeks.

Can Jeremy Lin keep up with his excellent performance?  Time will tell.  His outstanding premiere has captivated downtrodden Knicks fans and an international fan base, and caught the attention of Linvestors.  If he fails to maintain his pace, though, he could be one of the only athletes in history to single-handedly become an asset bubble.

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