World Cup Corner

Did you know that soccer results affect stock returns through their impact on investor mood? Yes it’s true! A loss in the World Cup elimination stage can lead to a next-day abnormal stock return.

Motivated by the abundance of psychological evidence showing that sports results have a strong effect on mood. There is a study which investigates the stock market effect of international soccer results. It documents a strong negative stock market reaction to losses by national soccer teams. The size of the loss effect is economically significant - in monthly terms, the excess returns associated with a soccer loss exceeds 7%.

The study finds also a statistically significant but smaller loss effect for international cricket, rugby, and basketball games.

But be careful there is no evidence of a corresponding reaction to wins in any of these sports.

Link to the full study: Sports Sentiment and Stock Returns.