Correlation and causality in the stock market and investments

OVER a decade ago, right before a Pacquiao fight, which was usually on a Sunday morning Manila time (so Saturday evening Las Vegas time), the head of fund management of a major Philippine bank made a rather inane comment. If he was trying to be funny, it was very lame, at least to me. He said if Pacquiao wins, the stock market would go up as in the recent fights every time Pacquiao won, the stock market closed higher the Monday after. This was a poor equivalent of the Super Bowl indicator in the United States, which after holding true for decades finally fell apart. Why? Correlation instead of causality or causation. What is the simple point he missed?

Correlation implies an association between two variables. That is all. It may or may not affect or cause a change in the variables, and one does not necessarily lead to the other. The association may be coincidental or more likely caused by or be related to a third or another reason.