Due to the global financial crisis, the investments of car manufacturers are going to be revised as never before; especially this is the case for any kind of commitment in sport sponsoring. In Formula One on the one hand costs are exploding, on the other hand money becomes shortened. That is why it becomes interesting to know to what extent a manufacturer’s involvement in this sport is worth it. We use an event study methodology analyzing the stock market response after race performances from 2005 to 2007. Our main results: McLaren- Mercedes and Fiat-Ferrari generate positive abnormal returns after wins for DaimlerChrysler and Fiat, and significantly weaker abnormal returns after losses. Conversely, returns for Renault change in an opposite way.
A widespread belief is that index funds should earn the index return. We argue that this would lead to a serious paradox. In our model, we analyse the effects of an increasing number of investors switching from active to passive investment.
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