Sports Sentiment and Stock Returns

Abstract

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. Copyright 2007 by The American Finance Association.

Event Clustering and Abnormal Returns: Reassessing the Informational Value of Bets

“…Ashton et al (2003) find a strong association between the performance of the England soccer team and the general stock market index returns. Using international soccer results as a mood variable, Edmans et al (2007) find an economically and statistically significant market reaction to losses, but not to wins. Brini and Palomba (2011) find a relationships between the stock returns of Italian soccer teams, their sport performances in terms of match outcomes, and the importance of the matches.…”

Market impact of international sporting and cultural events

“…Recent literature shows that events that have a general impact on investor sentiment, such as national team soccer results, produce statistically and economically significant returns. For example, Edmans et al (2007) find that a loss in World Cup leads to a next-day abnormal return of negative 38 basis points, and claim that this loss effect is driven by investor sentiment.…”

“…The model is built upon the models proposed by Malatesta and Thompson (1985) and Edmans et al (2007).…”

Asset Price Effects Arising from Sports Results and Investor Mood: The Case of a Homogenous Fan Base Area

“…In addition to the mood altering effect of sporting results, the possible behavioural impact on the stock market of sunshine, the number of daylight hours, nonsecular holidays, temperature and lunar cycles have also been examined (Kamstra, Kramer and Levi 2000, Frieder and Subrahmanyam 2004, Saunders 1993, Hirshleifer and Shumway 2003and Cao and Wei 2005. The link between stock market returns and investor mood following sporting results in particular is examined by Edmans, Garcia and Norli (2007) who hypothesise, citing much supporting evidence from psychology literature, that sporting results affect investor optimism and pessimism, self esteem and positive or negative feelings about life in general which in turn impacts investors' views about future stock prices.…”

“…More formally, Edmans, Garcia and Norli (2007) argue that in investigating the link between investor mood and market returns, the mood variable must satisfy three criteria. First, the variable must influence mood in a significant and unambiguous way, second it must impact a large proportion of the population and third it must be positively correlated across the majority of the (investor) population.…”