A forthcoming paper in the Journal of Finance addresses an interesting anomaly: Sports Sentiment and Stock Returns.
This paper investigates the stock market reaction to sudden changes in investor mood. Motivated by psychological evidence of a strong link between soccer outcomes and mood, we use international soccer results as our primary mood variable. We find a significant market decline after soccer losses. For example, a loss in the World Cup elimination stage leads to a next-day abnormal stock return of −49 basis points. This loss effect is stronger in small stocks and in more important games, and is robust to methodological changes. We also document a loss effect after international cricket, rugby, and basketball games.
HedgeFundGuy - am 2006-05-18 18:03
dsquared (guest) meinte am 19. May, 10:21:
sadly not investable, surely?
I would guess that if this is really a world cup effect, then the loss would be in the price at the open. Since most of these games take place in the evening, in order to make the -0.49% return, you would have to successfully forecast the result of the game, in which case you could probably do better by betting. I suppose that there might have been a trade here during the Japan/Korea world cup games, but since the cup is being held in the same time zone as most of the football-playing countries with liquid stock markets, I wouldn't get hopes up on this one.
HedgeFundGuy antwortete am 19. May, 16:42:
I suppose you get a better payout betting directly on the games if that is your edge.
Paul N (guest) antwortete am 26. May, 08:35:
I am always skeptical of these sorts of reports, but my guess is the soccer winner's country index doesn't rise if they win, so you could make $ by shorting both the day before.
